Generally speaking, tech stocks don’t come to mind when you think of stocks for dividend reinvestment, but these three are certainly exceptions to the rule, notes Charles Carlson of DRIP Investor.

Cisco Systems (CSCO)

This has not exactly been a stellar performer for investors over the last two years. The stock was the second-worst performer in the Dow Jones Industrial Average in 2010, and followed that dismal performance with another Top Ten worst showing among Dow components in 2011.

However, the stock’s poor performance over the last 24 months is one of the reasons these shares intrigue me for 2012. I’ve done a fair amount of research over the years on the “worst-to-first” phenomenon in the Dow.

In a nutshell, Dow stocks that do horribly one year tend to do well the following year. To be sure, it doesn’t always happen, but history does show that Dow stocks have an ability to rebound sharply after they have been depressed.

I think Cisco is ready to rebound in 2012. I like the stock’s valuation, I like that earnings estimates have been rising, I like that the stock has managed to beat earnings estimates in each of the last four quarters, and I especially like that the stock’s Quadrix Overall score is 94 (out of a possible 100).

Yielding 1.3%, Cisco represents a solid rebound play for 2012. The firm also offers a direct-purchase plan whereby any investor may buy the first share and every share directly from the company. Minimum initial investment is $500. For more information and an enrollment form, call 800.254.5194.

Motorola Solutions (MSI)

This is one of the two pieces remaining after the breakup of Motorola (the other is Motorola Mobility, which is being acquired by Google).

Motorola Solutions produces advanced data-capture devices such as barcode scanners and RFID (radio-frequency identification) products for business. The firm also makes professional and commercial two-way radios for a variety of markets.

The stock has been a solid performer in recent months, and I think these shares will really break out in 2012. Earnings estimates are trending higher, and the stock should draw additional attention now that it pays a quarterly dividend of 22 cents per share. The current yield is nearly 2%, a decent payout in this low-interest-rate world.

Per-share profits are expected to come in around $2.55 for 2011 and $2.89 in 2012. Motorola Solutions has beaten the consensus earnings estimate in each of the last three quarters, so those estimates may prove conservative.

Providing a kicker to these shares is takeover potential. Shareholder activist Carl Icahn reportedly owns roughly $1.8 billion worth of Motorola Solutions stock. Even if no takeover offer develops, Icahn’s looming presence will assuredly hold management’s feet to the fire.

I have great expectations for this Editor’s Portfolio stock in 2012. Motorola Solutions offers a direct-purchase plan whereby any investor may buy the first share and every share of stock directly from the company. Minimum initial investment is $1,000. For plan enrollment information call 800.704.4098.

Qualcomm (QCOM)

This is a stock for 2012 and beyond. The company’s chip technology is focused on mobile computing via smartphones, tablets, and other devices. The company gets the majority of profits from licensing its various technologies to vendors.

Emerging markets represent a huge opportunity as those developing countries continue to roll out 3G networks. Per-share profits should approach $3.60 in fiscal 2012, up from $3.20 in fiscal 2011. The company’s balance sheet includes nearly $21 billion in cash and investments and no long-term debt, so the firm is in great position to continue to fund research and development and dividend increases.

The stock, yielding 1.6%, is an attractive play on some of the fastest-growing markets in the tech and communications sectors. Qualcomm also offers a direct-purchase plan whereby any investor may buy the first share and every share of stock directly from the company. Minimum initial investment is $500. For plan enrollment information, call 800.619.9612.

Subscribe to DRIP Investor here…

Related Reading:

Related Articles
  1. Stock Analysis

    Analyzing Altria's Return on Equity (ROE) (MO)

    Learn about Altria Group's return on equity (ROE) and analyze net profit margin, asset turnover and financial leverage to determine what is causing its high ROE.
  2. Investing News

    Icahn's Bet on Cheniere Energy: Should You Follow?

    Investing legend Carl Icahn continues to lose money on Cheniere Energy, but he's increasing his stake. Should you follow his lead?
  3. Stock Analysis

    Analyzing Google's Return on Equity (ROE) (GOOGL)

    Learn about Alphabet's return on equity. How has its ROE changed over time, how does it compare to its peers and what factors are driving ROE for the company?
  4. Investing News

    Is Buffett's Bet on Oil Right for You? (XOM, PSX)

    Oil stocks are getting trounced, but Warren Buffett still likes one of them. Should you follow the leader?
  5. Investing News

    Chipotle Served with Criminal Probe

    Chipotle's beat muted expectations and got a clear bill from the CDC, but it now appears that an investigation into its E.coli breakout has expanded.
  6. Stock Analysis

    Analyzing Sprint Corp's Return on Equity (ROE) (S)

    Learn about Sprint's return on equity. Find out why its ROE is negative and how asset turnover and financial leverage impact ROE relative to Sprint's peers.
  7. Stock Analysis

    Why Alphabet is the Best of the 'FANGs' for 2016

    Alphabet just impressed the street, but is it the best FANG stock?
  8. Budgeting

    Plated Review, Is It Worth It?

    Take a closer look at the ready-to-cook meal service, Plated, and learn how the company can help you take the hassle out of home cooking.
  9. Investing News

    How China's Economy is Now Like America's

    China's economy could take the global economy down with it; why that might be good news in the grand scheme.
  10. Investing News

    A 2016 Outlook: What January 2009 Can Teach Us

    January 2009 and January 2016 were similar from an investment standpoint, but from a forward-looking perspective, they were very different.
RELATED FAQS
  1. How do dividends affect retained earnings?

    When a company issues a cash dividend to its shareholders, the retained earnings listed on the balance sheet are reduced ... Read Full Answer >>
  2. What is the difference between called-up share capital and paid-up share capital?

    The difference between called-up share capital and paid-up share capital is investors have already paid in full for paid-up ... Read Full Answer >>
  3. Why would a corporation issue convertible bonds?

    A convertible bond represents a hybrid security that has bond and equity features; this type of bond allows the conversion ... Read Full Answer >>
  4. How does additional paid in capital affect retained earnings?

    Both additional paid-in capital and retained earnings are entries under the shareholders' equity section of a company's balance ... Read Full Answer >>
  5. What types of capital are not considered share capital?

    The money a business uses to fund operations or growth is called capital, and there are a number of capital sources available. ... Read Full Answer >>
  6. What is the difference between issued share capital and subscribed share capital?

    The difference between subscribed share capital and issued share capital is the former relates to the amount of stock for ... Read Full Answer >>
COMPANIES IN THIS ARTICLE
Trading Center