Technology businesses are becoming the blue chips of the 21st century. That being stated, not all tech is created identical. There’s a patron as opposed to organization tech, software program instead of hardware, and a spread of different hardware technologies.
Two big-cap dividend payers inside the hardware area are Intel (NASDAQ: INTC) and Seagate Technologies (NASDAQ: STX). Today, let’s take a look at which is the higher area to your investment bucks.
What Intel and Seagate do
Intel is the undisputed leader in imperative processing gadgets (CPUs) that are the center processors of each non-public computer system and information facility. However, in the latest years, Intel has diversified its commercial enterprise, shopping for up subject programmable gate array chip maker Altera in 2015 and self-riding vehicle software maker Mobileye in 2017. Intel also has a smaller section dedicated to garage reminiscences, such as NAND flash and a new type of memory called three-D XPoint.
Seagate, however, is by and large inside the commercial enterprise of tough disk drives (HDDs), in which it had the largest marketplace proportion remaining yr, at 40%. HDDs are the most inexpensive shape of garage generation these days. However, HDDs also are being changed in lots of applications via NAND flash. Still, the HDD business has to be around for some time to come back. With only three primary gamers — Seagate, Western Digital, and Toshiba — Seagate ought to be capable of milk profits from HDDs simultaneously as the commercial enterprise slowly declines over time.
Seagate has additionally made investments in an try to future-proof itself. It invested $1.Three billion in Toshiba Memory Company (TMC) was taken personally via a Bain Capital-led consortium in early 2018. TMC makes NAND flash, so Seagate does have some publicity to the NAND market. Seagate also has small Ripple funding, which created the Ripple cryptocurrency (XRP) and distributed blockchain ledger.
Both Intel and Seagate are suffering from global technology call for, that’s currently going via a gentle patch. Yet looking during the last couple of years, Intel’s boom has actually been advanced, and its dominant eighty% processor marketplace proportion has afforded it better margins as well. Thus, it seems Intel is a superior-first-class agency.
- Winner: Intel
Of direction, it is not simply the quality of the organization however additionally the rate you pay as an investor. Turning to the ahead PE and corporation price-to-EBITDA multiples, Seagate appears the inexpensive of the 2, even though simply slightly.
Both corporations’ valuation metrics are pretty low, meaning the market predicted little to no growth for each in 2019. While the mild part might go to Seagate, these valuations are so close that I’m going to name this class a tie.
- Winner: Tie
- Payout ratios
Both corporations also are massive, mature coins cows, meaning that whilst you can now not see much inside the way of eye-popping revenue boom, every organization does go back plenty of coins to shareholders thru dividends and share repurchases.
Seagate has a much large dividend yield at five.18%, at the same time as Intel’s dividend, is less than 1/2 that at 2.28%. However, dividends are not the complete story; Intel returns a greater part of its coins wafts to shareholders in proportion to repurchases. That’s why its shareholder yield — which counts dividends and repurchases mixed — is a whole lot towards Seagate’s. That must allow Intel to grow its percentage fee and the dividend quicker than Seagate over the years. Still, Seagate does preserve a slight side here.
- Winner: Seagate
- Threats and risks
Both agencies also have risks to look at out for. Intel these days hit a snag utilizing falling in the back of competitors inside the race to fabricate 10nm chips. Competitor Advanced Micro Devices already has 7nm chips (equal to Intel’s 10nm) out to market and appears poised to take some market proportion. Meanwhile, Intel says its 10nm chips will ultimately be geared up by the holiday season of 2019.
At the same time, Seagate is combating a gradual decline in its essential HDD enterprise. Nevertheless, in the latest records-centric financial system, the call for reasonably-priced storage should last for a while. Over the long term, however, Seagate will likely need to conform with new merchandise and/or offerings.
Since Intel’s hazard is extra of a close to-term hiccup and Seagate’s looks as if a bigger long-time period hassle, Intel appears the safer of the two over the long haul.
- Winner: Intel
- Intel for protection
Intel comes out the victor right here with wins to at least one, as it appears to be the more secure pick. However, Seagate will be thrilling with a piece extra hazard for those searching for a piece extra yield and upside. Its dividend is excessive, expectations are low, and it does have the Ripple investment. Still, maximum investors ought to probably stay with the steadiness and variety of Intel.