Skip to main content
Don’t miss our
best deal ever
offer ends july 23
save over $160
Sale ends in
$6
for
6 months
Don’t miss our
best deal ever
$6
for 6 months
save over $160
// //

What are we looking for?

The information technology sector has been showing some recent weakness after leading the pandemic rally over the past year. As a result, my associate Allan Meyer and I thought we would be opportunistic and analyze U.S.-listed IT stocks using our investment philosophy focused on safety and value. Traditionally known as a growth sector, we wanted to see how the IT space stacks up using our conservative approach. Some names do offer characteristics we love, such as dividends, clean balance sheets and value.

The screen

We started with U.S.-listed equities in the IT sector with a market capitalization of US$50-billion or more, sorted from largest to smallest. We view market capitalization as a safety factor; larger companies tend to be more liquid and diversified.

Dividend yield is the annualized projected payout divided by the share price. All companies on this list are expected to pay a dividend.

Story continues below advertisement

Debt-to-equity is our final safety measure. A smaller number is better. As we like to say, it is difficult to go bankrupt when you have little or no debt.

Free-cash-flow-to-enterprise-value (FCF/EV) is a valuation metric and one of the cornerstones of our investment philosophy. A higher number is better. Free cash flow reflects the cash available to investors after considering all the costs related to doing business and we believe it is more difficult to manipulate compared with earnings-based measures. Enterprise value is a measure of a company’s total value.

Price-to-earnings is the share price divided by earnings. It is another valuation metric; the lower the number, the better the value.

Earnings momentum is the change in annualized earnings over the past quarter. A positive number indicates earnings are increasing, and vice versa for a negative number. Positive increases over the long term should lead to share price appreciation and dividend hikes.

Lastly, we included the 52-week total return to track performance, and the average and median numbers for better comparability.

What did we find?

Intel Corp. and Cisco Systems Inc. score well for safety and value. Intel boasts the best value in both related metrics but does have slightly negative earnings momentum. International Business Machines Corp. has the highest yield and offers an attractive valuation, however it carries higher levels of debt. Oracle Corp. is the most leveraged (highest debt) but looks interesting otherwise. Apple Inc. posted the strongest earnings momentum. Kudos to any investor that purchased Applied Materials Inc. a year ago (total return of 150 per cent); that stock, as well as Broadcom Inc., Qualcomm Inc., Analog Devices Inc., and NXP Semiconductors NV, caught our attention. Overall, most of the sector has generated positive returns and earnings momentum.

Investors should contact an investment professional or conduct further research before buying any of the securities listed here.

Story continues below advertisement

Select U.S.-listed information technology stocks 

CompanyTickerMkt. Cap. (US$ Bil.)Div. Yld. (%)Debt/Eqty. (%)FCF/EV (%)P/EEarns. Mom. (%)52W Ttl. Rtn. (%)Recent Close (US$)
Apple Inc.AAPL-Q2,116.80.7173.13.524.020.669.1126.85
Microsoft Corp.MSFT-Q1,861.70.961.62.629.98.238.1247.18
Visa Inc.V-N481.90.666.52.134.90.026.2225.97
Mastercard Inc.MA-N363.10.5198.31.942.0-1.433.6366.34
Nvidia Corp.NVDA-Q355.20.141.21.440.613.889.9570.63
Oracle Corp.ORCL-N231.11.6592.85.016.84.652.580.15
Intel Corp.INTC-Q226.02.444.99.012.1-1.1-0.855.97
Cisco Systems Inc.CSCO-Q224.62.838.57.315.60.628.453.16
Accenture PLCACN-N193.31.20.44.132.01.556.8290.61
Broadcom Inc.AVGO-Q178.13.2172.16.215.66.170.5436.10
Texas Instruments TXN-Q168.12.274.03.424.010.567.5182.05
Qualcomm Inc.QCOM-Q145.42.0260.93.315.619.075.0128.94
IBM Corp.IBM-N130.64.5298.88.613.0-0.824.5146.17
Applied MaterialsAMAT-Q114.40.751.53.219.69.8150.0124.69
Intuit Inc.INTU-Q107.50.666.02.141.5-5.744.0392.54
Fidelity Nat'l Info. Svcs.FIS-N92.71.040.63.122.00.419.4149.46
Lam Research Corp.LRCX-Q83.60.8112.62.518.717.2140.6586.45
Auto. Data ProcessingADP-Q82.71.934.83.530.1-0.536.7194.40
Global Payments Inc.GPN-N57.70.435.33.323.13.815.5195.31
Analog Devices Inc.ADI-Q55.61.842.93.423.68.446.0150.79
NXP SemiconductorsNXPI-Q52.11.185.14.218.913.391.0189.03
Average348.71.5118.74.024.56.155.9
Median168.11.166.03.423.14.646.0

Source: Refinitiv Eikon, Investment Counsel Inc. 

Sean Pugliese, CFA, is an investment portfolio manager at Wickham Investment Counsel, helping individuals, families and other investors.

Be smart with your money. Get the latest investing insights delivered right to your inbox three times a week, with the Globe Investor newsletter. Sign up today.

Your Globe

Build your personal news feed

  1. Follow topics and authors relevant to your reading interests.
  2. Check your Following feed daily, and never miss an article. Access your Following feed from your account menu at the top right corner of every page.

Follow the author of this article:

Follow topics related to this article:

View more suggestions in Following Read more about following topics and authors
Report an error Editorial code of conduct
Tickers mentioned in this story
Due to technical reasons, we have temporarily removed commenting from our articles. We hope to have this fixed soon. Thank you for your patience. If you are looking to give feedback on our new site, please send it along to feedback@globeandmail.com. If you want to write a letter to the editor, please forward to letters@globeandmail.com.

Welcome to The Globe and Mail’s comment community. This is a space where subscribers can engage with each other and Globe staff. Non-subscribers can read and sort comments but will not be able to engage with them in any way. Click here to subscribe.

If you would like to write a letter to the editor, please forward it to letters@globeandmail.com. Readers can also interact with The Globe on Facebook and Twitter .

Welcome to The Globe and Mail’s comment community. This is a space where subscribers can engage with each other and Globe staff. Non-subscribers can read and sort comments but will not be able to engage with them in any way. Click here to subscribe.

If you would like to write a letter to the editor, please forward it to letters@globeandmail.com. Readers can also interact with The Globe on Facebook and Twitter .

Welcome to The Globe and Mail’s comment community. This is a space where subscribers can engage with each other and Globe staff.

We aim to create a safe and valuable space for discussion and debate. That means:

  • Treat others as you wish to be treated
  • Criticize ideas, not people
  • Stay on topic
  • Avoid the use of toxic and offensive language
  • Flag bad behaviour

If you do not see your comment posted immediately, it is being reviewed by the moderation team and may appear shortly, generally within an hour.

We aim to have all comments reviewed in a timely manner.

Comments that violate our community guidelines will not be posted.

UPDATED: Read our community guidelines here

Discussion loading ...

To view this site properly, enable cookies in your browser. Read our privacy policy to learn more.
How to enable cookies