Investors interested in dividend growth investing may be interested to learn that three major companies in the information technology space have recently increased the size of their dividend payments. For those who are counting on dividends in retirement, increasing payments can help improve financial stability.
Accenture PLC (Acetonitrile, Finance), Microsoft Corporation (Microsoft, Finance) and Texas Instruments (Texas, Financial) recently raised their dividends and paid yields near or above their respective five-year averages. Even better, each name trades at a sizable discount to its GF value and has excellent return potential based on GF scores.
First, Accenture (Acetonitrile, Finance), one of the largest professional services firms in the world. The company provides consulting, outsourcing and technology services to clients in the communications, media, banking, healthcare and travel industries. Accenture is valued at $164 billion and had nearly $62 billion in revenue last year.
On Sept. 21, Accenture raised its upcoming November dividend by 15.5% to $1.12. 15 paydays, extending the company’s dividend growth streak to 12 years. The company’s dividend has grown at a compound annual growth rate (CAGR) of 11.2% over the past decade, putting the recent growth well above the long-term average.
The company’s stock has a forward yield of 1.8%, slightly above its five-year average of 1.7%, according to Value Line.
According to the GF Value Chart, Accenture is now trading well below its intrinsic value after its share price fell nearly 36%.
Accenture closed at $259.98 on Friday. The stock has a GF of $333.31, so the price to GF ratio is 0.78. Reaching the GF value would imply a share price increase of over 28%. Accenture is rated as Moderately Undervalued.
Based on its GF Score of 99 out of 100, the stock has a good chance of outperforming the broader market, according to a historical study by GuruFocus.
This incredibly strong GF score is driven by top scores in multiple areas. For example, Accenture received a 10 out of 10 ranking for profitability, growth and momentum. The company’s margin results and momentum metrics lead the industry. The same goes for return on equity and return on assets.
Financial strength remains solid at 8 out of 10, driven by Accenture’s ability to successfully use investment funds to grow the business. The company’s return on invested capital (ROIC) was 23.7%, while its weighted average cost of capital (WACC) was 6.9%.
The second tech name to raise its dividend recently is Microsoft (Microsoft, Financial), one of the world’s largest companies with a market capitalization of $1.8 trillion. The company provides software and hardware for consumers and businesses. Microsoft’s cloud services are one reason the company has become so valuable. Other products include video games and gaming hardware. The company’s revenue last year was nearly $200 billion.
Microsoft announced on September 2. On the 20th, the company will raise its dividend by 10% on December 2nd. 8 Payment date. This is close to the CAGR of 11.8% over the past decade, giving the company the 21st consecutive year of dividend growth. The stock yields 1.1%, just below its five-year average of 1.3%.
Microsoft is in the midst of a year-long sell-off, down nearly 29% over the past year. A positive for this decline is that the stock is now comfortably below its intrinsic value, according to the GF Value Chart.
At its most recent price of $237.92, Microsoft has a GF value of $309.71 and its price to GF value ratio is 0.77. This means the stock has the potential to return more than 30% from current levels.
Microsoft’s GF score is also a very strong 99 out of 100.
Microsoft has at least 8 out of 10 in each category used to assign GF points, including growth and profitability out of 10. The company has been near the top of the industry in terms of mid-term revenue and earnings growth, with low double-digit growth expected in both areas over the next three to five years, according to Morningstar estimates.morning, Financial Analyst.
Combined with a decade of profitability, Microsoft’s margins, return on assets, and return on equity are not only among the best among most competitors, but also among the company’s best performances over the past decade. Microsoft is one of the best companies to get a return on invested capital as its ROIC of 30.7% is much higher than its WACC of 6.4%.
The last name for the most recent shareholder payment is Texas Instruments (Texas, Financial), a leading manufacturer of semiconductors and related products. The $149 billion company had nearly $20 billion in revenue last year.
Texas Instruments’ most recent dividend announcement occurred in September. On Nov. 15, the company announced it would increase Nov. 15 payments by 7.8 percent. 15 Payment date. This is well below the compound annual growth rate of 21.7% that shareholders have been accustomed to over the past 10 years. Still, TI’s dividend growth momentum is now at 19 years.
The stock yielded 3.1%, above its five-year average of 2.6% and nearly double the S&P 500.
Shares of Texas Instruments fell more modestly, as it is down more than 15% year-to-date, but it still trades below its GF value of $198.53.
Shares of Texas Instruments are trading at $162.82 with a price-earnings ratio of 0.82. If the stock hits its GF value, investors buying at this price could see a 22% return before even considering the dividend yield.
Texas Instruments also has a very high GF score of 96 out of 100.
The company ranks at the top in all five areas of the GF score, leading profitability out of 10. Texas Instruments scores within at least 90% of all peers on every metric in this category, leading with very high operating and net margins. In addition, each recent score was at or near the company’s best performance over the past 10 years.
TI’s ability to convert invested capital into returns is more impressive than the other two tech companies discussed in this article. The company’s ROI of 66.9% significantly outperformed its WACC of 6.8%.
Investors looking to identify a name that can be used to create a growing income stream should pay attention to the dividend announcement. Accenture, Microsoft and Texas Instruments are the top three tech giants to announce dividend increases recently.
Accenture and Microsoft rose near or above their long-term historical averages, while Texas Instruments rose less than its typically announced gains. According to the GF Value chart, all three names offer good value, each with at least 20% low-end upside potential following this year’s decline. As such, investors looking for a combination of income and technology growth may find these three stocks attractive.