Tech stocks are popular in the investing community for their high growth and the cutting-edge technology and prosperity they offer to human life. They have not traditionally been known for dividends but some notable exceptions to this rule have shown up in recent years.

In this article, we will analyze the prospects of three techs tocks that offer solid dividend yields and high expected returns, namely Skyworks Solutions (SWKS), Intel Corporation (INTC), and Hewlett Packard Enterprise Company (HPE).

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Skyworks Solutions

Skyworks Solutions is a semiconductor company that designs, develops, and markets proprietary semiconductor products, such as antenna tuners, amplifiers, converters, modulators, receivers, and switches. The products of the company are used in various industries, including automotive, connected home, industrial, medical, smartphones, and defense.

Skyworks has been thriving in recent years thanks to the popularity of smartphones. The company is heavily reliant on the smartphone market, particularly on Apple. Over the past three years, Skyworks has generated 39%-51% of its annual revenue from Apple. This has been a tremendously profitable partnership for Skyworks. The company is trying to diversify its business to automobile connectivity and smart homes but it will remain closely tied to Apple for the foreseeable future.

Skyworks is firing on all cylinders right now. In its fiscal 2021, which ended on October 1^st, the company grew its revenue 52% thanks to robust demand across all its product categories and its earnings per share 71%, from $6.13 in 2020 to an all-time high of $10.50. Skyworks expects to maintain its strong business momentum thanks to the continued transition to 5G and other advanced connectivity solutions. Management expects earnings per share around $3.10 in the running quarter. If this materializes, it will mark 18% sequential growth.

Skyworks has enjoyed tremendous growth over the last decade thanks to the proliferation of smartphones, which include the chips of the company. Skyworks has grown its earnings per share by 20.9% per year on average over the last decade and 13.5% per year over the past five years. Given the impressive business momentum of Skyworks, with no signs of fatigue, it is reasonable to expect the company to keep growing its bottom line at a double-digit annual rate.

Moreover, Skyworks initiated a dividend in 2014 and has grown it at a fast pace since then. It is now offering a 1.5% dividend yield, which may seem lackluster on the surface, but the company can continue raising its dividend at a double-digit rate thanks to its markedly low payout ratio of 21%, its debt-free balance sheet, and its high earnings growth rate.

Intel Corporation

Intel is the largest manufacturer of microprocessors for personal computers, shipping about 85% of all microprocessors around the globe. Intel also manufactures products like servers and storage devices, which are used in cloud computing.

The key competitive advantage of Intel is its unparalleled scale, which renders the company dominant in its business. The scale of Intel makes its revenues less cyclical than they were in the past but the microprocessor manufacturer is still somewhat sensitive to recessions.

In the most recent quarter, Intel grew its revenue 5% over last year’s quarter thanks to record revenue in the Internet of Things and record third-quarter revenue in the Data Center Group. The company also benefited from strong demand for desktop products and thus raised its prices. As a result, it grew its adjusted earnings per share by 54%. Given also the sustained momentum in its business, management raised its guidance for the annual earnings per share for a second consecutive quarter, from $4.80 to approximately $5.28.

Intel has exhibited a somewhat volatile performance record but it has managed to grow its earnings per share by 8.4% per year on average over the last decade. Thanks to the growing demand for microprocessors, it is reasonable to expect Intel to grow its earnings per share at a mid-single-digit rate in the upcoming years.

Intel is also offering a 2.8% dividend yield, which is remarkable for a technology stock. Given the markedly low payout ratio of 26%, its rock-solid balance sheet, and its dominant business position, Intel is likely to raise its dividend meaningfully in the upcoming years.

Hewlett Packard Enterprise Company

The Hewlett Packard Enterprise Company is a business-focused organization with two divisions: Enterprise Group, which works in servers, storage, networking, consulting and support, and Financial Services. The company is a spin-off of the original Hewlett Packard Company (HPQ). The original company has retained its personal computer and printing business, while the newly created Enterprise firm focuses on new technologies in the digital infrastructure.

Hewlett Packard Enterprise has been successful in its digital infrastructure business so far. However, it faces intense competition from many other players, including Microsoft and Amazon. The effect of intense competition is clearly reflected in the performance record of Hewlett Packard Enterprise, which is remarkably volatile.

In the third quarter, the core business of Hewlett Packard Enterprise struggled, with “compute” revenue down 9% over last year’s quarter. However, the company enjoyed strong growth in its Intelligent Cloud business and thus grew its adjusted earnings per share from $0.01 in last year’s quarter to $0.29. Even better, management raised its guidance for the annual earnings per share from $1.82-$1.94 to $1.88-$1.96.

As mentioned above, Hewlett Packard Enterprise has exhibited a choppy performance record, primarily due to intense competition. On the bright side, the volatile performance has led the stock to trade at exceptionally low, single-digit, price-to-earnings ratios most of the time. The company has taken advantage of its cheap valuation and has reduced its share count by 29% over the last six years. Share repurchases are likely to remain a major growth driver for the bottom line for the foreseeable future.

Moreover, thanks to its cheap valuation, the stock is offering a 3.3% dividend yield, which can be considered safe given the payout ratio of 25% and the healthy balance sheet of the company. Overall, thanks to its cheap valuation, its high dividend yield, and the promising potential of its cloud segment, Hewlett Packard Enterprise is likely to highly reward its shareholders in the long run.

Final Thoughts

Most income-oriented investors dismiss the entire technology sector due to its poor reputation for dividends and its fast-changing nature, which is undesired by risk-averse investors. However, the above three tech stocks have decent growth prospects and offer solid dividend yields, with a wide margin of safety. Among the three stocks, Skyworks is offering the lowest dividend yield but it has the most exciting growth prospects ahead.