CIMBAs: Dividend Paying FANGS?

Despite recent weakness, the technology sector has been among the best-performing groups for well over a year. And leading the charge have been a group of stocks dubbed the “FANG” stocks — Facebook (FB), Amazon (AMZN), Netflix (NFLX), and Alphabet (GOOGL), observes Chuck Carlson, editor of DRIP Investor.

Two other stocks that often get thrown in with the FANGs include Apple (AAPL) and Nvidia (NVDA). All of these stocks have moved sharply higher in the last two years. The one problem for DRIP investors is none of the FANG stocks offers a company-sponsored DRIP.

Fortunately, technology stocks exist that do offer DRIPs and do provide a way to play technology. I call them the “CIMBAs” (sorry, I couldn’t think of a catchier acronym) — Cisco Systems (CSCO), Intel (INTC), Microsoft (MSFT), Baidu (BIDU), and Altaba (AABA).

All of the CIMBAs offer direct-purchase plans whereby any investor may buy the first share and every share of stock directly from the company.

While these stocks, as a group, have not posted the massive gains of the FANG stocks in the last two years, all of the stocks have done quite well, and I see further upside for all of the CIMBAs. The following are reviews of each of the CIMBAs, including details of their direct-purchase/ dividend-reinvestment plans.

■  Altaba, formerly Yahoo, is a derivative way to play internet commerce. The firm is essentially a fund that holds stakes in a number of entities, including a 36% stake in Yahoo Japan and a 15% stake in the Chinese giant Alibaba (BABA).

 The company owns a patent portfolio as well as  stakes in nine public and private companies, but it is the holding in Alibaba that drives the value. Altaba has been searching for ways to monetize its holdings in a tax-friendly way, and the Alibaba position is the most important in this regard.

There is some throught that the new tax law could help untangle some of the tax problems that have been hindering the ability for a tax-friendly monetization of the Alibaba stake. One hope is that Alibaba would buy Altaba. I own Altaba shares and believe that the parts are worth more than the whole. The stock will likely be volatile with the broad market, but I am very comfortable owning the stock in portfolios.

Altaba’s direct-purchase plan has a minimum initial investment of $250. The firm will waive the initial minimum if an investor agrees to automatic monthly investment via electronic debit of a bank account of at least $50. There is a one-time enrollment fee of $10. Purchase fees are $5 ($2.50 if made with automatic debit) plus $0.03 per share.

Selling fees are $15 for a batch sale and $25 for market or limit order plus $0.12 per share. The company currently does not pay a dividend. The plan administrator is Computershare. For enrollment information call (877) 946-6487 or visit Computershare at www.computershare.com.

■  The number of Internet users in China is estimated to be more than 770 million, making it the largest market in the world and more than double the users in the U.S. One firm that will continue to capitalize on this growth market is China-based Baidu.

The company, often tagged as the “Google of China” because of its strong web search product, offers a variety of Internet services and applications, such as video, payment, and cloud services. Like Google, Baidu has been building out its artificial intelligence expertise and is getting involved in such areas as autonomous cars.

The stock has come down sharply from its 52-week high of $275. The uncertainty of how U.S. tariffs will impact China companies is one factor crimping the stock. Baidu announced that it wants to fl oat an initial public offering (IPO) in the U.S. for its streaming video subsidiary, iQiyi.

Baidu stock has a history of big price swings, but history also shows that it has been a good idea to buy these shares when they are down. Im a fan of the stock at these levels and view it as a way for DRIP investors to gain international exposure in the technology space.

Baidu’s direct-purchase plan has a minimum initial investment of $200. Subsequent investments are a minimum $50. There is a $10 enrollment fee. Purchase fees are $5 plus $0.10 per share. Fees to reinvest dividends are 5% of the amount reinvested (maximum $5) plus $0.10 per share.

Selling fees are $10 plus $0.10 per share for batch sale and $25 plus $0.12 per share for a market order. The plan administrator is Computershare/ Bank of New York Mellon. For additional information visit www.computershare or www.mybnymdr.com or call (888) 269-2377.

■  Cisco Systems has posted strong gains over the last 12 months, with the shares rising more than 26%, doubling up the performance of the S&P 500 over the same time period. The company is doing a nice job of transitioning its business toward higher growth markets.

Per-share profits handily beat the consensus earnings estimate in 2017, and the firm is set for 8% to 10% earnings growth this year. Cisco’s financial position is quite strong, with net cash assets totaling roughly $7 per share. Wash out the cash, and the shares trade for less than 14 times 2018 earnings estimate of $2.58 per share.

Enhancing appeal is the stock’s yield of 3%. That hefty yield should come in handy if the broad market becomes more volatile and investors want some dividend support to their technology investments. The stock is a buy at current prices and would be especially attractive under $40.

Cisco’s direct-purchase plan has a minimum initial investment of $500. The fi rm will waive the minimum if an investor agrees to automatic monthly investment via electronic debit of a bank account of at least $50. There is a one-time enrollment fee of $10. Purchase fees are $5 ($2.50 if made with automatic debit) plus $0.05 per share.

Dividend reinvestment fees are 5% of the amount being reinvested (maximum $3) plus $0.05 per share. Selling fees are $15 for a batch sale and $25 for market or limit-order sale plus $0.12 per share. The plan administrator is Computershare. For enrollment information call (800) 254-5194 or  visit Computershare at www.computershare. com.

■  Intel has had big earnings beats in the last two quarters, with revenue growth also bettering analysts’ estimates. The firm is seemingly working through the “bug” issues with some processors that came to light earlier tis year. The company's pivot into higher growth markets such as data centers and autonomous cars, is not lost on Wall Street.

Despite the stock’s impressive performance over the last 12 months — these shares are up 44% versus an 11% increase in the S&P 500 — the stock still trades at a reasonable 14 times 2018 earnings estimates. The stock’s dividend yield of 2.3% enhances total-return appeal and should provide some support on the downside.

Given the stock’s gains over the last year, some profit taking is expected if the market’s recent downdraft continues. Nevertheless, Intel has turned the corner, and the stock represents a solid play for tech investors who want more yield and a little less volatility.

Intel’s direct-purchase plan has a minimum initial investment of $250. The firm will waive the minimum if an investor agrees to automatic monthly investment via electronic debit of a bank account of at least $50. There is a one-time enrollment fee of $10. Purchase fees are $5 ($2.50 if made with automatic debit) plus $0.05 per share.

Dividend reinvestment fees are 5% of the amount being reinvested (maximum $5) plus $0.05 per share. Selling fees are $15 for a batch sale and $25 for market or limit-order sale plus $0.12 per share. The plan administrator is Computershare. For enrollment information call (800) 298-0146 or visit Computershare at www.computershare. com.

■  A time existed when Microsoft was viewed as pretty much a stodgy, old tech company with little growth potential. The reality is Microsoft is a vibrant company with positions in a number of exciting markets. The firm’s Azure cloud platform is growing quickly, with revenues here rising 98% in the most recent quarter.

Overall, revenue jumped a healthy 12% in the quarter. For fiscal 2018 ending in June, per-share profits should exceed $3.65, up from $3.29 in the previous year.

At 25 times fiscal 2018 earnings estimates, Microsoft is more richly valued than, say, Intel and Cisco and probably more vulnerable to weakness during a market pullback. Nevertheless, Microsoft’s long-term prospects remain well above average. Yielding 1.9%, the stock is a high-quality holding in the sector.

Microsoft’s direct-purchase plan has a minimum initial investment of $250. Subsequent investments are a minimum $25. There is no enrollment fee. Purchase fees are $2.50 plus $0.10 per share.

Reinvestment fees are 5% of amount reinvested (maximum $3) plus $0.06 per share. Selling fees are $15 plus $0.10 per share. The plan administrator is AST Financial. For enrollment information call (800) 285-7772 or visit www.astfinancial.com.