Investors often see a trade-off between high growth opportunities and income. However, in a market selloff, growth names can go on sale. And when they do, any dividend that they may be paying can become much larger than average.
Striking a balance between the two involves looking at where some of the best bargains lie under current market conditions. But investors looking for growth and income have a growing number of opportunities right now.
One such opportunity is in Qualcomm (QCOM). The manufacturer of wireless chips is a dominator in its niche. And with shares down 35 percent over the past year, a number of factors are lining up for a rebound in the coming year and beyond.
The most attractive factor now is the stock’s valuation, which is cheap at 12 times forward earnings. That’s especially true with the stock’s growth rate of 22 percent over the past year. And with a 29 percent profit margin, Qualcomm has a growing pile of cash it can dedicate to its dividend.
Action to take: Today’s buyers can get a 2.4 percent starting dividend, which is likely to keep increasing over time. That payout is about 25 percent of Qualcomm’s earnings, so it’s safe while also giving the company a lot of cash to continue developing new chips.
For traders, a long-term bet on a recovery next year looks attractive. The September 2023 $150 calls, last going for about $5.15, offer high double-digit returns on a move higher in shares in the first three quarters of next year.
Disclosure: The author of this article has no position in the company mentioned here, but may trade after the next 72 hours. The author receives no compensation from any of the companies mentioned in this article.