Retirement Planners: Keep Your Eyes on Tech

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The recent additions of storage and enterprise giant EMC (EMC) and chip-maker SanDisk (SNDK) 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 here):

  • Information technology has grown year-over-year dividends at 49.5% last quarter, and has done so by at least 10% for nine consecutive quarters.
  • IT still has the lowest proportion of dividend payers (60%) within its segment, but 80% of those payers raised dividends by at least 10% during the first quarter of 2013.
  • IT is expected to have the highest dividend-per-share growth rate among all S&P 500 sectors in 2013 at nearly 34% (the middle seven sectors are expected to improve dividends between 5% and 13%).

Some big names — such as Oracle (ORCL), 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 of the companies in the sector with bulging pockets, including Cisco (CSCO), Microsoft (MSFT) and Apple (AAPL). These are just the biggest names in the pond, of course.

Texas Instruments (TXN), 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) 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) and Google (GOOG) 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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Article printed from InvestorPlace Media, https://investorplace.com/2013/08/retirement-tech-dividends-orcl-emc-sndk/.

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