Meta Platforms' recent announcement that it plans to start paying a dividend was a surprise in a sector better known for share buybacks than yield.
Information technology companies' yields are around 0.7%, one of the lowest among 11 sectors worldwide.
S&P500 index.
Nevertheless, income investors can find plenty of dividends in growing tech stocks, and even a few with attractive yields in the 3% range.
“This is not what happened 20-odd years ago,” said Simeon Hyman, global investment strategist at ProShares. “Technology pays dividends and there are always people who pay dividends.”
Paying dividends is “no longer considered taboo in the tech world,” said Dan Ives, Wedbush's senior equity analyst covering tech companies.
Advertisement – SCROLL TO CONTINUE
He believes Meta is taking a page from Apple by introducing dividends.
's
playbook. “We're going to see more and more of this because it's attractive to income-oriented investors,” Ives said.
There is definitely scope for more benefits from technology.Just under 40% of technology companies participate in broad markets
S&P Composite 1500
The dividend is well below the roughly 75% of acquisition offers, according to a report by Goldman Sachs' portfolio strategy team.
Apple stock yields 0.5%, while the S&P 500 average yields about 1.5%. The company is spending more on common stock buybacks than on dividend payments, $3.8 billion versus $20.1 billion in the last three months of 2023. But Apple has been modestly but regularly increasing its dividend, most recently to 24 cents per share. Starting at 23 cents on a quarterly basis.
Microsoft has a dividend yield of just 0.7%, but it has regularly increased its dividend by about 10% per year. “This has long been a poster child for us in terms of technology companies with the ability and desire to grow their dividends over the long term,” said Mike Barclay, the firm's senior portfolio manager.
Colombian dividend income
Advertisement – SCROLL TO CONTINUE
Fund.
Berkeley looks for companies with strong balance sheets, good profit margins, and durable cash flows. As of Dec. 31, information technology was the fund's largest sector weighting, at 18.5%.
He consistently sees double-digit dividend growth at semiconductor capital equipment suppliers like KLA and Lam Research.
.
Their stock yields about 1%, which at first glance isn't anything to write home about. However, KLA's quarterly dividend was $1.45 per share, up nearly 12% from $1.30. Lam Research pays $2 per share for the quarter, compared to $1.725 per share. That's an increase of 16%.
IBM is the top two profitable technology names
,
3.6%, Cisco Systems
,
Advertisement – SCROLL TO CONTINUE
It was 3.1%. Networking and security “are at the heart of everything you hear” [chief information officers] “We're talking about Cisco,” Berkley said, adding, “Cisco has a great franchise.”
Cisco has increased its quarterly dividend by pennies in recent years, most recently to 39 cents a share. IBM similarly boosted its quarterly dividend from $1.65 to $1.66 per share, benefiting from the artificial intelligence boom. That should lead to an increase in dividends.
Another way to take advantage of tech dividends is the S&P Technology Dividend Aristocrats Index. It is equally weighted and rebalanced four times a year. These 36 stocks from the S&P 1500 have increased their dividends for at least seven consecutive years. Its constituent stocks include tech giants such as Microsoft, Apple, and Oracle.
.
However, it also includes many small-cap stocks such as Dolby Laboratories.
,
Roper Technologies has a recent market capitalization of approximately $7.6 billion.
,
At $59 billion. These stocks have yields of 1.5% and 0.6%, respectively.of
ProShares S&P Technology Dividend Aristocrats
Exchange-traded funds track the tech aristocrats.
Email: editors@barrons.com
