3 Low-Risk Tech Stocks for Retirees

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The tech sector can be volatile, and volatility isn't something most retirees are comfortable with -- and for good reason. However, retirees still need stocks in their portfolio for growth to help combat inflation. We asked several of our Motley Fool contributors to sift through the bevy of tech stocks that, over time, offer less risk than some of their peers. Let's check out whyCisco Systems , Qualcomm and Microsoft made the grade.

Bob Ciura(Cisco Systems):Cisco is a low-risk stock for retirees for several reasons. First, the networking specialist has proven that it takes dividends seriously. It's true that, just a few years ago, Cisco didn't even pay a dividend, but the company reinstituted its payout after a decade-long hiatus in 2011. Back then, the dividend was just $0.06 per share, however, Cisco has increased its quarterly dividend at an astonishing rate since then -- most recently to $0.21 per share. This represents a more than threefold increase in just the past four years.

Such aggressive dividend growth has turned Cisco into one of the highest-yielding technology stocks today. Cisco's dividend offers a 3% yield right now, which is quite solid considering interest rates are still near historic lows.

Cisco is an appropriate stock for retirees because the company also has a ton of cash on the balance sheet, along with an attractive valuation. At the end of last quarter, Cisco held $53 billion in cash and short-term investments, with only $19 billion in long-term debt.

Today, Cisco trades for 16 times earnings per share, which is a discount to the broader market. (The S&P 500 index is trading for about 20 times earnings.)

To sum it up, Cisco's high dividend yield, cash-stuffed balance sheet, and modest valuation provide a margin of safety, and that's something every retiree should consider when reviewing their portfolios.

Dan Caplinger(Qualcomm):Among tech stocks, Qualcomm has become an attractive play even for conservative investors. The chip giant not only has profited greatly from being among the first movers to realize the value of going after the mobile-device market, but it also has developed a huge treasure chest of patents and other intellectual property that it licenses out to third-party manufacturers. With the combination of its own proprietary products and the revenue from its licensing deals, Qualcomm has created an income stream that would last for years into the future even if the company stopped innovating with new products entirely. Already, Qualcomm has shared that income with stockholders, paying a dividend that now features a near-3% yield.

Some investors believe Qualcomm would be worth more if the company broke into two or more parts, separating out the licensing business from its own chip-production operations. Yet Qualcomm has plenty of opportunities to keep growing both parts of its business, and keeping the two components together gives the company synergies that it would otherwise lose to third-party providers. For conservative investors looking for a bargain, Qualcomm offers an attractive entry point and exposure to the still-growing mobile market.

Tim Brugger(Microsoft):Microsoft has been the target of some angst as shareholders and potential investors bemoan the ever-declining PC market, and there's some logic to those concerns. However, as CEO Satya Nadella's two-pillared "mobile-first, cloud-first" business transition takes hold, investors will be less inclined to focus solely on Microsoft's PC-related sales. Microsoft's transition is making strides, and it will only get better from here.

Predictably, a decline in Windows Pro and non-Pro OEM sales last quarter garnered much of the press following Microsoft's earnings announcement. That's too bad, because the more important news for investors was Microsoft's impressive sixth straight quarter of triple-digit revenue growth in its cloud unit. With an annual run-rate of $5.5 billion, Microsoft is one of, if not the, leading cloud providers around.

As for Nadella's "mobile-first" pillar, there's more to Microsoft's plans than selling smartphones. Selling entry- and mid-level phones in emerging markets is a sound strategy, but that's only part of the Microsoft mobile story. Finally introducing an iOS-compatible Office 365 version opened the floodgates to get Microsoft's software and services into as many devices as possible, regardless of the operating system. Since the Office 365-iOS announcement, Microsoft has announced new versions of Delve, Lens, and other solutions developed for Android and iOS.

Nadella's vision of Microsoft's future is unfolding before investors' eyes. Sure, Microsoft stock will fluctuate, just as any other. But with a nearly 3% dividend yield, mounting evidence its transition to burgeoning markets is working, and with a very reasonable stock price based on future earnings estimates, Microsoft is worth considering for almost any retiree's portfolio.

The article 3 Low-Risk Tech Stocks for Retirees originally appeared on Fool.com.

Bob Ciura has no position in any stocks mentioned. Dan Caplinger has no position in any stocks mentioned. Tim Brugger has no position in any stocks mentioned. The Motley Fool recommends Cisco Systems. The Motley Fool owns shares of Qualcomm. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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