Uncovering Hidden Gems in Tech: 3 Dividend-Paying Stocks With Upside Potential

Investors often focus on high-growth stocks, but sometimes the most attractive opportunities lie in overlooked, undervalued companies. This is particularly true for dividend-focused investors seeking stable returns while waiting for growth.

To identify these hidden gems, we screened the S&P 500 Info Tech group for dividend-paying stocks with relatively low forward earnings multiples. The criteria included:

• Annual Dividend Yield % (FWD): 1% or higher to find companies with meaningful payouts.
• Price/Earnings (P/E) Forward: below 30, a little under Info Tech’s roughly ~33 forward P/E ratio.
• Number of Analysts: 12 or more. The more, the merrier, since more analysts can give us a better read on the overall consensus.
• Current Analyst Rating: bullish stocks with ‘Moderate Buy’ to ‘Strong Buy’ ratings.

We applied these filters to the S&P 500 Info Tech group and obtained 11 companies. Among them, we’ll focus on the top three with the lowest forward P/E ratio.

Cognizant Technology Solutions (CTSH)

Cognizant Technology Solutions is a leading tech and consulting company that helps businesses modernize their operations through digital solutions, including AI and cloud computing. Large companies like McDonald’s turn to Cognizant to keep the technology behind their operations fresh.

CTSH stock is trading at around $59 with a forward P/E ratio of around 10.6x, the lowest in this list. This makes it look cheap based on its forward earnings. The company pays a forward annual dividend of $1.32, translating to a yield of around 2.2%. A consensus among 27 analysts rates it a ‘Moderate Buy,’ with a potential upside of up to 38% if it meets its high target price.

Accenture Plc (ACN)

Accenture Plc is a much bigger brother and rival to Cognizant that operates in the same areas, including consulting, AI, and cloud computing. Accenture’s reach is hard to miss, with 195 of its top 200 clients working with the company for at least the last 10 years. That puts the company behind the scenes of many big companies such as Marriott and Unilever.

Its size is reflected in a stock price of around $178 and a forward P/E ratio of around 13x, it’s a little above Cognizant but still well below the S&P 500 Info Tech sector average. The company also pays a forward annual dividend of $6.52, which translates to a yield of around 3.65%. A consensus among 25 analysts rates the stock a ‘Moderate Buy’ with a high target price, suggesting as much as 54% upside over the next year.

Intuit Inc (INTU)

Intuit Inc takes a different route from the first two. The company develops financial software and platforms used by consumers and businesses, including well-known brands such as TurboTax, QuickBooks, Credit Karma, and Mailchimp. Its stock is recovering from recent lows, currently trading at around $358, while its forward P/E sits at around 16x. With signs of recovery, this might be the diamond in the rough that offers both a mix of upside and yield.

For dividend investors, Intuit pays $4.80 annually, which translates to an annual yield of approximately 1.33%. A consensus among 31 analysts rates the stock a ‘Moderate Buy,’ with mean-to-high target prices suggesting upside of between 27% and 151% over the next year, making it the highest on this list.

Final Thoughts: Tech is probably the most exciting and investable industry of the 21st century, but, ironically, that attention isn’t evenly distributed. Some companies are still flying under the radar and trading at low P/E ratios, but that alone doesn’t make them good investments. Cognizant, Accenture, and Intuit give investors more to work with. All three pay fair dividends and carry bullish Wall Street ratings, making their stocks interesting for more than valuation alone.