The Rising Power of Semiconductors
Semiconductors, commonly referred to as microchips, are a shining beacon of technology, permeating nearly every facet of modern life. Over the past few years, chip stocks have surged in popularity and for a simple yet compelling reason – they have proven to be outstanding investments.
Microchip Marvel: Micron Technology
Micron is engaged in the production and distribution of high-performance memory and storage technologies. The stock has captured a Zacks Rank #1 (Strong Buy), with analysts significantly upgrading their earnings projections. In addition to gaining exposure to the semiconductor industry, investors stand to enjoy a steady passive income, as MU shares presently yield 0.5% annually. Although the yield may seem modest, it offers a vital safety net against potential downturns. Micron’s projected growth is undeniably impressive, with consensus estimates for the current fiscal year indicating a 90% surge in earnings on a 43% increase in sales. Looking ahead, the expectations for FY25 hint at an additional upswing in earnings accompanied by a 45% surge in sales.
ASML: A Semiconducting Star
ASML commands a leading position in manufacturing cutting-edge technology systems for the semiconductor sector. The company has witnessed a positive shift in its earnings outlook across almost all timeframes, propelling it to a Zacks Rank #2 (Buy). Similar to MU, ASML shares come with the advantage of generating passive income, with the annual dividend currently offering a 0.7% yield. Moreover, the company has consistently prioritized rewarding its shareholders, boasting an impressive 33.4% five-year annualized dividend growth rate. Although ASML shares may seem expensive, their current valuation of 35.5X is below the 36.1X five-year median and the high of 55.4X in 2021. The stock holds a Value Style Score of ‘D’.
The Bottom Line
Semiconductor stocks have enjoyed a meteoric rise over the past few years, swiftly becoming darlings among investors. For those seeking exposure, both Micron Technology and ASML align perfectly with the criteria. In addition to their favorable Zacks Ranks, both stocks offer dividends, undoubtedly another enticing feature for passive income investors.