The technology industry has been marred by large-scale layoffs, an erosion of earnings, and cost-cutting measures, prompting investors to contemplate the worst tech dividend stocks.
Though the sector has enjoyed an out performance driven by a few big players, the performances are few.
Investors must be wary of tech dividend trap stocks in the current scenario, which may seem attractive but could prove detrimental over the long run.
Over the past few quarters, earnings reports have taken a hit from a slowing economy. Analysts estimate that tech earnings in the U.S. dropped 15% in the first three months through March due to higher costs and slowing demand.
Such a scenario will almost certainly lead to many tech dividend cutters, who’d be looking to navigate the macro environment without significantly impacting its financial flexibility.
Let’s look at three tech dividend stocks to avoid that are likely to burn their shareholders in the not-so-distant future.
| INTC | Intel | $30.73 |
| IRM | Iron Mountain | $55.70 |
| AMKR | Amkor Technology | $21.39 |
Intel (INTC)
Intel (NASDAQ:INTC) shareholders may have felt left in the lurch as the tech behemoth slashed its dividend payout by a jaw-dropping 66%. It continues to cede market share to its competitors in the chip sphere, with AMD at the top of the list.
In a recent article, I mentioned how Intel dropped 82% in 2018 to 62% in 2022.
Disappointingly, Intel reported its first-quarter earnings recently, which showed a nearly 36% year-over-year decline in sales, totaling $11.7 billion.
The firm suffered a staggering net loss of $2.8 billion, marking the most significant quarterly loss in the company’s history. Additionally, in the past 11 consecutive quarters, INTC stock has plummeted over 33% in the past 12 months.
Although Intel strives for a turnaround, its ambitious plan to transform its factories into foundries for other companies’ chips will take time. The company is looking to set its sights on 2026 to compete for high-profile work, but until then, the road ahead is incredibly bumpy ahead.
Iron Mountain (IRM)
Iron Mountain (NYSE:IRM) has established its position as a frontrunner in safeguarding valuable physical and digital assets catering to various clientele across various businesses.
It provides versatile storage solutions for diverse needs, ensuring the secure preservation of essential assets for its burgeoning customer base.
To be fair, there’s much to like about the company’s operations, fundamentals, and stockholder-centric strategies. There’s a lot to detest regarding its valuation and dividend profile with the firm.
IRM stock trades at a lofty 17.5 times its trailing twelve-month cash flows, more than 40% higher than its sector median.
Its dividend profile is unattractive, with a 5-year dividend growth rate of just 1.7%. What’s more concerning is its dividend safety, with its net long-term debt-to-assets ratio at a whopping 65%, roughly 54% higher than the sector median.
Its levered free cash flow margin is at just 1.4%, more than 90% lower than its peers. Hence, it’s safe to say, and it’s one of the dividend trap stocks you’d want to avoid.
Amkor Technology (AMKR)
Amkor Technology (NASDAQ:AMKR) is a global provider of outsourced semiconductor packaging and test service. It offers robust and comprehensive turnkey solutions catering to a wide range of clientele internationally.
Though it’s coming off a relatively solid year in 2022, the same can’t be said for its position in 2023. Its management is projecting a 7.9% decline in fiscal 2023 sales to $6.53 billion compared to last year.
The downbeat forecast is linked to multiple headwinds, particularly in the low-end smartphone market, where demand is expected to shrink. Additionally, the drop in sales and income raises concerns, especially as the consumer wearable and computing sectors are also under immense duress.
There’s not much to like about its dividend profile. It offers a 0.4% 4-year average dividend yield, which lags the sector by more than 70%. It’s only been paying dividends in the past couple of years, compared to the 9 year sector median.
On the date of publication, Muslim Farooque did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.