- The technology businesses have presented a resilient business model during the Covid-19 pandemic
- Many technology stocks have outperformed despite the economic fallout and unprecedented challenges prevailing in the trading environment.
The importance of technology in our lives has gone up manifolds during the lockdown induced by the coronavirus pandemic. On the same time, it is the technology businesses which has witnessed the minimal impact on their scale of operations throughout the pandemic in comparison to many other sectors. The stock markets also had a glimpse of recovery as they witnessed a strong rally with support from technology stocks.
The festive season is round the corner, and the increasing number of coronavirus cases has led nations to enforce the second phase of lockdown. Notably, Lockdown 2.0 was implemented across the UK earlier this month. Toronto (Canada) is the latest city to witness a second lockdown. With the slew of lockdowns again, the use of technology is bound to increase, Technology stocks are gaining interest from most of the street-smart investors.
More than 150 technology companies are listed on the London Stock Exchange. In this article, we would put our lens through some of them which are doing pretty well despite the economic fallout and unprecedented challenges prevailing in the trading environment.
Also read: Top 10 technology stocks to look at
- Softcat Plc
FTSE 250 listed technology services provider, Softcat Plc (LON: SCT) has had a positive start for the fiscal year 2021 with a strong balance sheet, robust market prospect, and compelling long-term opportunity. Softcat has also made continued progress with both existing and new customers. It has more than 200 number of significant vendor and partner relationships.
During the first quarter of 2021, the company achieved its recruitment targets with ease and delivered year-on-year growth in revenue, gross profit, and operating profit. Softcat’s Cash generation has remained in line with the management’s expectations. The company expects to transcend into the second quarter with the same momentum.
The business has no debt and a consistent track record of strong cash generation. During the fiscal year 2020, the company managed to deliver strong performance through the year, with year-on-year growth in revenue of 8.6 per cent, gross profit of 11.6 per cent and operating profit of 10.9 per cent despite the economic carnage caused by the pandemic.
The Company reported that the customer base increased by 3 per cent year-on-year, and gross profit per customer grew by 8 per cent year-on-year. The Company held a strong balance sheet, with net cash at year-end of £80.1 million along with zero debt on it. The Board has recommended a final ordinary dividend per share of 16.6 pence, with a proposed further special dividend payment of 7.6 pence per share.
The technology company has managed to deliver a price return of 4 per cent and has outperformed the benchmark index in a year’s time. Softcat shares last traded at GBX 1,206 on 20 November 2020.
- AVEVA Group Plc
FTSE 100 listed AVEVA Group PLC (LON: AVV) is a Cambridge-headquartered Engineering & Industrial Software Company, which creates industrial software that inspires people to shape a sustainable future.
The company is known for its AI, Cloud, Extended Reality, and digital marketing capabilities. It has increased its investments in these domains to derive growth in future. The revenue and gross profit of the company have increased at a CAGR of 40.94 per cent and 33.83 per cent, respectively, during the course of the last four years (H1 FY17 to H1 FY21). The Company continued to experience strong customer demand while its order pipeline remained strong.
Overall, growth is likely to be driven by strong sales execution and the ongoing trend towards digitalisation. FY21 is expected to be resilient despite the challenging global economic environment. The higher volume of contract renewals and robust order pipeline shall generate solid revenue growth during the second half of 2021. Moreover, the proposed acquisition of OSIsoft remained on-track. Looking forward, the Company is well-positioned to navigate through the challenges of the existing environment, with the benefit of recurring revenue from multiyear contracts. AVEVA stayed in a robust financial position with a strong balance sheet and ongoing cash generation.
The company’s recurring revenue as a percentage of total revenue increased from 61.9 per cent during the first half of 2020 to 64.2 per cent in the first half of 2021. The recurring revenue grew across all four business units. As a result of tight cost control, the adjusted cost declined by 8.3 per cent year-on-year. The interim dividend per share was maintained at 15.5 pence, which reflected business resilience. The proposed acquisition of OSIsoft would bolster AVEVA’s position as a global leader in industrial software. AVEVA shares last traded at GBX 4,275 on 20 November 2020.
- Sage Group Plc
Sage Group Plc (LON: SGE) is an FTSE 100-listed provider of business software and solution in North America, North Europe, Central Europe, Africa, Middle East, Asia, and Latin America.
For the fiscal year 2020, Sage Group expects its recurring revenue growth to be in the range of 8-9 per cent. The organic operating margin is expected to be around 22 per cent for the fiscal year 2020.
Overall, the sustained investment in Sage Business Cloud throughout the economic cycle will form a robust base for the long-term success of the Group. Moreover, the company remained committed to investing for the long term to reshape the product portfolio and reposition the Company strategically. The Company has mentioned that there is a limited impact on business through COVID-19 pandemic. The company’s full-year dividend, which included a final dividend of 11.32 pence was up by 2 per cent to 17.25 pence for the fiscal year 2020. SAGE Group shares last traded at GBX 5,88.80 on 20 November 2020.
High yielding dividend stocks may be a good bet amid lower Government Bond yield regime.
With yields on UK government bonds are at a record low, stocks with higher dividend yield (%) will be back in investor’s attention.
Dividend stocks usually do not get into a free fall and outperform most of the time.
Dividend stocks are easy to get cash flow from your stock investments without liquidating anything. Further, you can use dividends to buy additional units of stock. And, if you reinvest dividends, you can significantly increase your long-term return from your investments because of the power of compounding.