Three (3) Undervalued Dividend-Paying Tech Stocks While Samsung's results may not spark a major reversal in the chip industry they, and other signs within the market, suggest a bottom is in play and it's one for...

Dividends Will Make The Difference In The Second Half

While Samsung's results may not spark a major reversal in the chip industry they, and other signs within the market, suggest a bottom is in play and it's one for dividend investors to take advantage of. The chip stocks are undervalued and pay safe, if not always large dividends. Today's list includes not only some deep values but some high yields as well. We aren't expecting a major reversal in the market but neither are we expecting the bottom to fall out and that means it's time to start making regular buys of high-quality names at opportune prices.

Micron Technology, The Deepest Value

The entire chip sector is on sale right now and Micron (NASDAQ: MU) is among the deepest values. The stock is trading at roughly 7X its earnings compared to 11X or 12X for some of the other large, well-established players. The stock is also among the lowest yielding with a dividend of 0.70% but it is a very safe dividend that can be counted on. The company is only paying out 4% of its earnings so a topping out or pullback in business is nothing to be feared. In fact, based on the history and the outlook for business we are expecting to see Micron raise its dividend incrementally over the next few years, possibly more than once per year, until it is in line with the broader dividend-paying chip industry.

The analysts have been pulling back their price targets for Micron since the last earnings release but the consensus is still offering more than 40% of upside. The consensus rating, however, has held firm at Moderate Buy for the last year and we don't see this changing without a major change in the outlook for memory chips. As it is, cloud and data center demand is underpinning the business and is not expected to abate.

Qualcomm, A Diversified Choice

Qualcomm (NASDAQ: QCOM) was recently hailed by an analyst for its diversification within the chip industry, a factor that helped it outperform expectations in the last earnings report and raise guidance for the year. In regard to value and yield, Qualcomm is trading at a steeper 11X earnings but still a value compared to the broad market and the yield is attractive too. The stock is yielding a little less than 2.0% with shares trading near $140 but it comes with a best-in-breed pedigree and a high expectation for future increases. The company has been raising the dividend annually for the last 20 years and is well on the way to becoming a Dividend Aristocrat.

The price targets for Qualcomm have been falling as well but also offer substantial upside for new investors. The Marketbeat.com consensus rating has held firm and steady and Moderate Buy over the past year while the price target peaked out at $250 and has since fallen to $193. The $193 is about 35% above the recent price action, however, and it is not likely to fall further without a change to the outlook.

Intel, The High-Yield Choice

Intel's (NASDAQ: INTC) comeback may still be in question but its ability to pay the dividend is not. At current share prices and distribution levels, the stock is paying out 3.7% and only 28% of its earnings with a history of growth as well.

In our view, the analysts are right to be wary of revenue and earnings but we think the estimates for Q2 results are too low. The current consensus is the lowest level of revenue and earnings in 11 quarters which we don't see happening. There may have been a downtick in demand but demand is still high. Regardless, the dividend is safe and weak results appear to be priced into the stock already.