Market Overview

Top Performing Dividend Payers in Tech with the Most Upside Potential (ATVI, DST, SFUN)

It is not unusual for stocks on a tear to overrun their mean price targets, which is a signal of how far analysts on average expect the share price to climb.

Some of the top performing dividend payers in the technology sector over the past six months, such as semiconductor and software maker ARM Holdings (NASDAQ: ARMH) and Finnish mobile phone maker Nokia (NYSE: NOK), have done just that. Others are at or near their mean price targets.

But analysts believe that Activision Blizzard (NASDAQ: ATVI), DST Systems (NYSE: DST) and SouFun Holdings (NYSE: SFUN) still have some room to run, despite rising more than 19 percent in the past six months.

Activision Blizzard

This Santa Monica, California-based interactive entertainment company has a market capitalization of about $16 billion. Its dividend yield is near 1.3 percent, but the price-to-earnings (P/E) ratio is higher than the industry average.

The long-term earnings per share (EPS) growth forecast is about nine percent. The operating margin is greater than the industry average, but the return on equity is less than 11 percent.

The number of shares sold short as of the January 31 settlement date represents a little more than three percent of the float. That is the lowest level of short interest since last June.

All but two of the 25 analysts who follow the stock and were polled by Thomson/First Call recommend buying shares; 12 of them rate the stock as a Strong Buy. The mean price target, or where analysts expect the share price to go, represents more than eight percent potential upside over the current share price. That would be a level shares have not seen since September of 2008.

The share price has risen more than 31 percent year to date. Much of that gain followed the stronger-than-expected fourth-quarter report earlier this month. The share price hit a new multi-year high on Tuesday.

Yet the stock has underperformed competitors Electronic Arts (NASDAQ: EA) and Take-Two Interactive (NASDAQ: TTWO) over the past six months.

DST Systems

This information processing and software services provider is headquartered in Kansas City, Missouri, and supports the financial services industry. It sports a market cap near $3 billion and offers a dividend yield of about 0.9 percent.

Its long-term EPS growth forecast is more than eight percent, and the P/E ratio is less than the industry average. EPS were better than expected in the fourth-quarter report, and David Einhorn nearly doubled his stake in 2012.

The short interest was less than three percent of the float at the end of January. That was the smallest number of shares sold short since November.

The consensus recommendation of the five analysts surveyed is to buy shares, and it has been for the past two months. Their mean price target is about 10 percent higher than the current share price. The stock has not seen that level since January of 2008.

The share price of this one also reached a multiyear high Tuesday, after rising more than 20 percent in the past 90 days. Over the past six months, the stock has outperformed larger competitor Fiserv (NASDAQ: FISV), as well as the broader markets.

SouFun Holdings

This $2.1 billion market cap company operates a real estate Internet portal and a home furnishing and improvement website in the People's Republic of China. Its dividend yield is about 7.1 percent. The return on equity is a about 103 percent, and the operating margin is greater than the industry average. The P/E ratio is lower than the industry average, and the long-term EPS growth forecast is more than 27 percent.

The short interest is less than one percent of the float. The number of shares sold short has been dwindling since November.

Three of the five analysts surveyed recommend buying shares, and none recommends selling. Their mean price target is more than 12 percent higher than the current share price. That price target would be a new multiyear high.

The share price is about 89 percent higher than six months ago, though shares have traded mostly between $26 and $28 since the beginning of the year. The stock has outperformed Sohu.com (NYSE: SOHU), as well as the broader markets, over the past six months.

Posted-In: Activision Blizzard ARM HoldingsLong Ideas News Short Ideas Dividends Dividends Trading Ideas Best of Benzinga

 

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