Sector Analysis: Technology Dividends Updated: 4/8/2013
Technology stocks and dividends were not synonymous just a few years ago. As the technology secotr has matured with increases in earnings, cash holdings, and stable levels of debt, returns to shareholders with dividend payments have substantially increased. In Q2 2013, Apple, the world’s largest company by market capitalization, will join the ranks of dividend payers by reinstating dividend payments; yield is expected to be around 1.8%. Apple joins other major technology names like Microsoft, Cisco and Intel, who have become strong dividend players over the years.
The tech dividend story is not limited to a handful of names; the entire sector has seen significant growth in dividend payments and was the fastest growing sector of dividends paid in the past five years.Between 2005 and 2012, the technology sector of the NASDAQ U.S. Benchmark Index has increased its dividend value paid out by 326%. The next closest sector is Consumer Services at 139%.
The gains in the Technology sector dividend payments have also been more consistent compared to other sectors. The financial sector experienced rapid increases with a 33% increase between 2005 and 2008, but then a large 55% decline between 2008 and 2012.
Technology companies have been able to maintain and increase dividends due to the cash flows generated from their businesses. Looking at cash and marketable investments on hand, technology is the second largest sector behind financials with $58 billion. Technology companies have significant cash holdings and minimal creditors and as such are in the best position, compared to other sectors. Read the full report here