As investors, we are always on the prowl for great companies we can buy at discounted prices. Lucky for us, the sell off over the past few days has placed some great businesses on sale. These companies are not only cheap, but have great dividend yields, strong prospects, and a ton of cash on their balance sheets.
It’s what’s inside
Intel Corporation (NASDAQ:INTC) has proven to be very successful at generating cash as it has been able to convert close to 12% of its revenue into free cash flow. This massive amount of cash flow has helped to build up its balance sheet. Intel Corporation (NASDAQ:INTC) currently has $17.6 billion or $3.45 a share in cash and cash equivalents.
Intel Corporation (NASDAQ:INTC) also uses very minimal amounts of debt. It currently has a debt-to-equity ratio of just 0.26. Its dividend yield of 3.60% is solid and safe considering its payout ratio is only 44%. Intel Corporation (NASDAQ:INTC) has a history of providing value to shareholders through dividends and buybacks.
The future of Intel Corporation (NASDAQ:INTC) lies in its ability to adapt its products to a the mobile market. Intel had its first breakthrough into the tablet market with Microsoft’s Surface Pro. It continues to gain ground with Samsung recently announcing its next generation Galaxy Tablets will be powered by Intel’s Haswell chips.
The Samsung win is especially important, as the Galaxy tabs are Android-powered devices. Intel, who has traditionally been associated with Windows products, will need to break into Apple and Android devices to stay relevant.
The jack of all trades
Cisco Systems, Inc. (NASDAQ:CSCO) trades at 11.82 times forward earnings with a dividend yield of 2.80% and a payout ratio of 29%. The company appears dedicated to shareholders after increasing its dividend by 183% since the second quarter of 2011. Cisco Systems, Inc. (NASDAQ:CSCO) also has a very attractive balance sheet with $47.39 billion or $8.87 in cash per share. It has also been able to effectively manage debt as the company currently operates a debt-to-equity ratio of just 0.28.
Cisco Systems, Inc. (NASDAQ:CSCO) generates a ton of cash flow from operations and has been able to achieve record sales for nine straight quarters. The company is also expecting growth in cloud computing and looking into potential acquisitions to capitalize on the industries growth. With a low payout ratio and an expected long-term compound annual growth rate (CAGR) of 8.3%, the company has plenty of potential in the years to come.
The not so traditional tech choice
The company currently trades at 10.29 times earnings and at 1.04 times book value. It also has a cushy dividend yield of 2.7% with a low payout ratio of 28%. Corning Incorporated (NYSE:GLW) is expected to grow earnings at 12% annually over the next five years. It recently reported a revenue increase of 13.7%, about 6% higher than the industry average.
The company has a rock solid balance sheet having ended its first quarter with $5.78 billion or $3.92 per share in cash. Corning Incorporated (NYSE:GLW) has been extremely proactive in decreasing its debt load having paid down around $600 million since the end of 2012. Its increased focus on eliminating debt has dropped Corning Incorporated (NYSE:GLW)’s debt-to-equity from an already marginal 0.16 down to 0.13.
Foolish final words
With the major sell off taking place, it may be time to get back to basics, as Mr. Market has put some great companies on sale. Intel, Cisco Systems, Inc. (NASDAQ:CSCO), and Corning Incorporated (NYSE:GLW) are all very cheap tech companies that happen to sport nice dividend yields and have terrific balance sheets. Now may be a good time to pick up shares at a discount.
Daniel Paterson has no position in any stocks mentioned. The Motley Fool recommends Cisco Systems, Corning, and Intel. The Motley Fool owns shares of Corning and Intel. Daniel is a member of The Motley Fool Blog Network — entries represent the personal opinion of the blogger and are not formally edited.
The article 3 Undervalued Tech Stocks originally appeared on Fool.com is written by Daniel Paterson.
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