Cloud computing gives you the best of both worlds as an investor: a market that already has a strong presence and is still growing rapidly.
According to Gartner Inc., worldwide revenue for public cloud services is set to reach $214.3 billion this year, up from $182.4 billion in 2018.
Better yet, revenue is expected to jump to $331.2 billion – a 55% increase – by 2022.
And the dividend stock we’re bringing you today is the perfect way to capitalize on this lucrative sector.
First, it gives you a solid, reliable dividend – one that is both 20% higher than industry average, and that’s just been raised 20%.
On top of that, this dividend stock is also poised for a big rise in share price.
That’s why our Money Morning Stock VQScore™ system just gave it a top score.
By at least one metric, it’s trading at a 77% discount to its peers, meaning it could be set to quadruple in price once the market wakes up to its value.
Because even if you don’t know the name, there’s a good chance this company’s cloud solutions have already had an effect on your life…
This Low-Profile Cloud Leader Makes the Big-Name Services Work Better
NetApp Inc. (NASDAQ: NTAP) doesn’t grab as many headlines as other players in the cloud computing industry. But in the 27 years since its founding, the Silicon Valley company has quietly established itself as an industry leader.
In fact, NetApp solutions often work in tandem with bigger-name cloud providers. Reach Plc., one of the largest news publishers in the UK, used NetApp’s Cloud Volumes ONTAP to seamlessly transfer its disaster recovery system onto Amazon.com Inc.’s (NASDAQ: AMZN) AWS cloud storage.
NetApp’s product made the enormous amount of data transfer quickly – 50 minutes under target, to be exact – and kept tabs on every bit of data to prevent complications in case of a hiccup.
ONTAP also helps companies maximize their efficiency when working in a hybrid (cloud and onsite) setup or using more than one cloud storage service, making it a must-have for larger companies with diverse operations.
NetApp solutions have been especially critical for McKesson Corp. (NYSE: MCK), which distributes a third of all prescribed medicine in North America.
Getting that medicine into the right hands quickly is important not only for the company’s bottom line, but for the health and safety of patients. But regulations prevent healthcare organizations from keeping certain medications on hand. In order to manage such a large, complex distribution system, McKesson employs a suite of cloud-based solutions from NetApp running in tandem with Microsoft Corp.’s (NASDAQ: MSFT) Azure cloud service.
Given that about half of the hospitals in the United States rely on McKesson, there’s a strong chance you or someone you know will be the beneficiary of NetApp’s products if you haven’t been already.
In spite of keeping a low profile by Silicon Valley standards, NetApp is certainly held in high regard by its peers in the industry.
At the Google Cloud Next 2019 Partner Summit in April, NetApp was named Google Cloud Technology Partner of the Year for Infrastructure. The award recognizes the enhancements NetApp has provided for the Google Cloud ecosystem by Alphabet Inc. (NASDAQ: GOOGL).
Also in April, Think Global Forum presented NetApp with its award for Brand of the Year, in recognition of the company’s leadership and forward-thinking solutions to large-scale technological problems.
With that kind of recognition in the industry, it’s only a matter of time before the market clues in to what it’s missing.
Now Is the Time to Buy NTAP
NTAP got caught in the stock market downturn in late 2018, and has yet to fully recover.
But the fundamentals suggest this stock is undervalued at $60 per share.
The company completed its most recent fiscal year (ending in April) with 30% growth in earnings per share. EPS is now up 112% since 2016, and it’s projected to increase in each of the next three years according to FactSet.
That strength prompted the board to boost the dividend by an impressive 20%. That puts the yield at 3.18%, which is 20% better than industry average.
As a further indication of the board’s confidence in NetApp’s strength, the combined total of dividends and stock buybacks in the 2019 fiscal year was $2.51 billion. That’s for a company with a market cap under $15 billion.
Wall Street sees NTAP’s value too. Analysts tracked by FactSet give the stock an average rating of “Overweight,” with price targets as high as $86. That represents a 43% gain from the current price.
But other metrics suggest a much stronger gain than that. NTAP’s forward price/earnings ratio of 0.6 is just 23% of the industry average.
That means it would take a rise of 330% for the stock to reach fair value compared to its peers.
So this is a stock that could deliver a huge gain in the short term as it continues to ride the cloud computing wave higher in the coming years.
And you can enjoy a nice dividend along the way.
— Stephen Mack
Source: Money Morning