Retirement Planners: Keep Your Eyes on Tech

by Marc Bastow | August 6, 2013 1:52 pm

The recent additions of storage and enterprise giant EMC (EMC[1]) and chip-maker SanDisk (SNDK[2]) to the rolls of dividend-paying tech companies is a continued sign that retirement and other income-focused investors should pay close attention to.

Because it’s a trend that should continue to go.

Consider these details from FactSet’s recent report in Dividend Quarterly (the complete report is available[3] here):

Some big names — such as Oracle (ORCL[4]), which doubled its dividend earlier this summer — contributed greatly to some of these statistics, but the trend is spanning the sector as tech stocks increasingly become a great place for long-term dividend investment.

Why? Well, profitability, cash hordes, and cashflows are the primary drivers. Jeff Reeves points out just a few[5] of the companies in the sector with bulging pockets, including Cisco (CSCO[6]), Microsoft (MSFT[7]) and Apple (AAPL[8]). These are just the biggest names in the pond, of course.

Texas Instruments (TXN[9]), for instance, has improved its dividend more than 150% in the past half-decade. It also can handle more — TXN sat on more than $3 billion in cash as of the most recent quarter and pumped out $3.4 billion in operating cash flow in fiscal 2012. TXN currently yields 2.8%, too, which at least tops the 10-year T-note for now.

Data-storage manufacturer Seagate Technology (STX[10]) is another example. While STX admittedly cut back its dividend from 12 cents per share to 3 cents in February 2009, the payout has come roaring back to 28 cents currently, good for a 3.75% dividend yield. Seagate has more than $2 billion in the bank and has pumped out $3 billion in cash flow so far this year vs. paying out $518 million in dividends.

Looking down the road, Amazon (AMZN[11]) and Google (GOOG[12]) are two names that come up when investors mull the question of which big tech stock will be next to pay a dividend. AMZN is unlikely considering the company is still working on being consistently profitable. Google, though … it has $50 billion in cash and billions more in cash flow, and is much better off on the profits side.

Given GOOG’s meteoric run and the fact Google is considering a stock split, chances are it won’t institute a dividend anytime soon, but it’s the closer of the two.

Regardless, keep your eyes on the sector as a whole. There’s plenty more income down the pike.

Marc Bastow is an Assistant Editor at InvestorPlace.com. As of this writing, he was long MSFT and AAPL.

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Endnotes:
  1. EMC: http://studio-5.financialcontent.com/investplace/quote?Symbol=EMC
  2. SNDK: http://studio-5.financialcontent.com/investplace/quote?Symbol=SNDK
  3. the complete report is available: http://www.factset.com/websitefiles/PDFs/dividend/dividend_6.17.13
  4. ORCL: http://studio-5.financialcontent.com/investplace/quote?Symbol=ORCL
  5. points out just a few: http://investorplace.com/2013/08/10-blue-chips-with-cash-cushions-for-a-crisis/
  6. CSCO: http://studio-5.financialcontent.com/investplace/quote?Symbol=CSCO
  7. MSFT: http://studio-5.financialcontent.com/investplace/quote?Symbol=MSFT
  8. AAPL: http://studio-5.financialcontent.com/investplace/quote?Symbol=AAPL
  9. TXN: http://studio-5.financialcontent.com/investplace/quote?Symbol=TXN
  10. STX: http://studio-5.financialcontent.com/investplace/quote?Symbol=STX
  11. AMZN: http://studio-5.financialcontent.com/investplace/quote?Symbol=AMZN
  12. GOOG: http://studio-5.financialcontent.com/investplace/quote?Symbol=GOOG
  13. InvestorPlace Retirement Insights : https://order.investorplace.com/index.jsp?sid=CN8104&uid=208.250.100.2-1331660604127937

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