When a stock becomes oversold, for investors, it can create an attractive buying opportunity. One way to gauge when a stock is oversold is by using the Relative Strength Index, or RSI. RSI looks at a stock’s gains and losses over the past 14 trading days and when there have been greater losses than gains, the RSI number falls lower. And once it falls below 30, it is considered oversold, and thus, is an indicator that there has been an excess in selling.
Tech and computer hardware stock Seagate Technology Holdings (NASDAQ:STX) fell into oversold territory last week with its RSI value falling to just under 29. The selloff comes after the company reported its third-quarter earnings on April 20. Revenue for the period ending March 31 totaled $1.9 billion and was down 34% year over year. Seagate has been seeing a significant slowdown in demand but management says “we now expect demand recovery to begin towards the end of the calendar year.” And that “in response to this dynamic environment, we are taking aggressive actions to lower our cost structure while still positioning Seagate to thrive over the long-term and sustain our technology leadership.”
Despite an unprofitable quarter (Seagate’s net loss was $2.09 per share), the company still declared a cash dividend of $0.70. And its free cash flow of $174 million during the quarter was still enough to cover its dividend payment, which cost $145 million. Seagate’s dividend yield of 4.5% is fairly high and if a recovery does end up happening before the year is over, this could prove to be a good time to buy this dividend stock.