3 Booming Tech Stocks (Not Apple) to Own for 2012

Story updated with Apple's new high and additional IBM information.

NEW YORK ( TheStreet) -- IBM ( IBM), Qualcomm ( QCOM) and Microsoft ( MSFT) offer investors that perfect combination of dividend stability and robust growth, say analysts.

From IBM's booming software sales to Qualcomm's ongoing smartphone success and Microsoft's 2012 resurgence, the trio offer plenty of growth opportunities, while still paying decent dividends. Apple ( AAPL), which has superior revenue and profit growth, pays no dividend, though investors speculate that may change, given the nearly $100 billion cash pile.
IBM is one of the tech heavyweights combining a stable dividend with strong growth.

Clearly, the days when tech dividends were perceived as the antithesis of growth are over.

"In the years of the dot.com boom, in Silicon Valley there was a firm dividing line between what would classically be called value stocks and growth stocks," explained Charles King, principal analyst at tech research firm Pund-IT. "Dividends were in the purview of stodgier, older stocks -- it was considered déclassé for tech stocks."

Fast forward to 2012, however, and many investors have come to appreciate dividends, particularly after the economic uncertainty of the last few years. Even Apple, the sexiest of consumer technology stocks, is coming under sustained pressure to rethink its controversial dividend strategy. The iPhone maker has not made a dividend payment since 1995.

Shares of the Cupertino, Calif.-based tech giant nonetheless hit a new all-time high of $474.22 on Wednesday.

Additionally, traditional non-dividend payers such as Microsoft and Cisco ( CSCO) have done an about-face. The software giant, for example, reversed its stance in 2003. Cisco, which reports its second-quarter results after market close on Wednesday, paid its first-ever dividend last year, but recently faced calls from consumer advocate Ralph Nader to increase its payment.

TheStreet will be live-blogging Cisco's earnings, starting at 3.45 ET:

Read on for more details on why IBM, Qualcomm and Microsoft are the best of both worlds for investors -- booming, dividend-paying, tech stocks:

IBM

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Widely regarded as one of tech's more dependable stocks, IBM offers both a healthy dividend and great share price gains.

IBM's stock has risen more than 17% over the last 12 months as the hardware and software behemoth continues its upward trajectory. Shares of arch-rival HP ( HPQ), in contrast, have plunged almost 40% over the same period, while the S&P 500 has gained a little over 2%.

The Armonk, NY-based company hiked its quarterly dividend from 65 cents to 75 cents last year, and offers investors a forward annual dividend yield of 1.5%.

Last year, IBM also announced plans to devote an additional $7 billion to share buybacks, further adding to its luster.

"One of things that they have been really good with is the share buyback," explained Sterne Agee analyst Shaw Wu, during a phone interview "Shareholders benefit from the share accretion when that happens."

Sterne Agee initiated coverage of IBM earlier this week with a buy rating and $230 price target, noting that Big Blue is well positioned for double-digit earnings growth.

"The beauty of the IBM story is that double-digit EPS growth is not dependent on the top line, but rather a growing mix of higher-margin software (23% of revenue) through organic means and acquisitions," explained Wu, in a note. "IBM is arguably the model enterprise company - like Apple in the consumer space, IBM is who players in the enterprise space aspire to be, in our view."

"The company has long been considered a leader in business technology," agreed Pund-IT's King, citing, in particular, IBM's successful shift towards areas such as software and cloud computing. "I think they have been particularly adroit at spreading their bets," he added.

Shares of IBM, which aims to deliver annual earnings of at least $20 per share in 2015, have risen more than 5% this year.

Qualcomm

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While Intel ( INTC) may be the best known of the dividend-paying chip stocks, investors should check out rising star Qualcomm ( QCOM), according to Sterne Agee analyst Vijay Rakesh.

"They are supplying to almost all of Apple now," he said, citing the presence of the company's chips in devices such as the iPhone and iPad. "You have growth and a dividend there," he added.

The San Diego, Calif.-based company pays a quarterly dividend of 22 cents a share and has a forward annual dividend yield of 1.4%. The company's shares have risen almost 12% over the last 12 months, compared to dips of more than 18% and 54%, respectively, at rivals Broadcom ( BRCM) and Nokia ( NOK).

Rated one of TheStreet's top 4G stocks, thanks to its 4G-enabled chip technology and a slew of licensing deals with device makers such as Samsung, LG, HTC and Huawei, Qualcomm's perfectly positioned for next-generation telecom networks.

"Obviously, they are the leaders in 3G/4G," noted Sterne Agee's Rakesh. "As the trend to smartphones continues, it plays well for them longer term."

The analyst also sees great opportunities for Qualcomm in China, a vast emerging market that the company is only just starting to penetrate.

Speaking at CES last month, Qualcomm president Steve Mollenkopf also described new revenue streams as smartphone technology evolves.

"Demand for smartphones is quite strong; it has been driving our business for the last couple of years," he said in an interview. "But, in addition to that continuing, we see these new opportunities open up as the smartphone use case comes into the home, the automobile."

Highlighting Qualcomm's success, the company recently sailed past Wall Street's estimates in its recent first-quarter results, and raised its guidance.

Microsoft

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Fresh from its recent 52-week high, the software giant's another dividend/growth stock that investors should be paying attention to.

"Microsoft pays a pretty good dividend," explained Sterne Agee's Wu. " And it's something of a turnaround play."

Shares of Microsoft did nothing in 2011 as investors cast doubts on the company's growth prospects, although Wu believes that this perception is changing. "I wouldn't say that Microsoft is firing on all cylinders, but they have managed their growth better than expected -- that's why the stock's doing so well."

Despite concerns about a sagging PC market, the software maker recently beat Wall Street's earnings forecast, a result seen as a positive for the rest of the tech sector. Microsoft CFO Peter Klein noted that enterprise spending is helping the software giant deal with PC weakness during a conference call to discuss the results. "The overall business environment remains strong for us," he said.

Revenue from Microsoft's Server and Tools business grew 11% year over year, boosted by double-digit growth in Windows Server and SQL Server premium. Sales of Exchange and SharePoint products also climbed 10%, while revenue from its Lync communications software and Dynamics CRM grew by more than 30%.

TheStreet's Jim Cramer also described Microsoft as a "stealth opponent of Apple" recently thanks to the strength of its Xbox system. The forthcoming Windows 8 operating system is also expected to be a growth driver for the firm, particularly on mobile devices.

As for its dividend, Microsoft raised its payment last year, citing the company's strong performance. The Redmond, Wash.-based firm now pays a quarterly dividend of 20 cents for an impressive yield of 2.64.

Microsoft shares have gained almost 17% this year.

>>To see these stocks in action, visit the 3 Booming Tech Stocks portfolio on Stockpickr.

-- Written by James Rogers in New York.

>To follow the writer on Twitter, go to http://twitter.com/jamesjrogers.

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