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So far, 2014 has been a choppy and tricky market, but tech stocks have hit a sweet spot, outperforming the market and finding favor with investors. M&A activity such as Facebook acquiring Whatsapp and the successful IPO of Coupons.com, have also kept investor interest high in the tech sector.
Tech stocks are not just about capital gains – some are among the top dividend stocks today, offering attractive dividend income. In fact, the tech sector is now one of the biggest contributors in terms of dividends in the S&P 500. This is partly because the tech sector has the highest weight in the S&P, but also because certain tech giants, such as Apple and Cisco, have initiated dividend payout to the shareholders.
"Many people are surprised to learn that dividend income and reinvestment can account for nearly 90% of total stock market returns over time," Money Morning Chief Investment Strategist Keith Fitz-Gerald said. "When it comes to consistently growing and protecting our money, I'd rather focus on getting the cold, hard cash that dividends kick off. That's because I know those are a much bigger component of overall investment returns over time.
Here are three of the best dividend stocks today from the tech sector that are worth evaluating for your portfolio:
A Closer Look at Three Dividend Stock Picks in the Tech Sector
Seagate Technology PLC (Nasdaq: STX)
In today's shift to cloud computing, advocating a hard drive manufacturer seems antithetical. However, Seagate's storage business is still competitive.
The recent mobile revolution and consolidations in the industry have made Seagate a viable force over the last few years. The stock price of Seagate has shot up to a value that's fifteen-times its lows in March 2009, and now costs $57.03 per share.
Seagate is currently paying a dividend at a higher rate than before, with its latest yield at 3.5%. The dividend payout appears sustainable as it stands at 34% of FY2014 earnings. Despite STX's price appreciation, the stock doesn't look expensive with forward price-to-earnings (P/E) ratio of less than nine.
Additionally, the company spent more than $1.1 billion on research and development (R&D) last year, focusing on new products and more efficient operations.
STX's diversification within the stock sector itself makes it one of the best tech dividend stocks today.
Cisco Systems Inc. (Nasdaq: CSCO)
Cisco stock hasn't seen a rosy path like some of the other stocks within the tech sector, and its returns have been comparatively more subdued over last few year. The stock has appreciated only around 70% since March 2009 lows, which is significantly lower than the appreciation in S&P 500.
But recently the company delivered better than expected earnings, and this is a stock that has been paying dividend income since 2011. The dividend yield is impressive at 3.5% with a dividend payout ratio of just 38% of FY2014 earnings, suggesting that this dividend yield will sustain.
Intel Corp. (Nasdaq: INTC)
Intel is a blue chip tech company that has a mature business. Despite Intel's maturity, room for growth still exists.
INTC stock is currently trading at attractive valuations of just 11-times forward PE. While the return of the stock over 10 years has been negative, last year's stock returns were encouraging at around 15%. Shares currently cost $26.35, with a 52-week low of $20.75 and a high of $27.12 per share.
The dividend yield for Intel has been impressive at 3.62%, ranking it as one of the top dividend stocks today in the tech universe. Intel has a strong track record of paying dividends to investors, and the high dividend payout makes it an attractive option for your portfolio.