Follow Dividend Stocks Alerts Start the conversation
Comment on This Story
Or to contact Money Morning Customer Service, click here.
I sure hope you don't make the kind of costly mistake my uncle, a retired telco worker, made.
A few years ago, he invested in a communication company that offered a juicy double-digit dividend.
When I heard about that, I ran some numbers on the company. And what I saw alarmed me.
Windstream Communications had a mountain of debt. My concern was that if things got tight, it would cut the dividend.
And sure enough, that's exactly what happened. Shares slid from a high of $100 to below $2 before Windstream filed for bankruptcy protection.
I'm sharing this story with you because I'm concerned other retirees, or those approaching retirement, may be tempted to shop around for high yields after the Fed recently signaled its commitment to low interest rates.
Irony abounds. Tech has become the very best place to find dividends that are the least likely to be cut no matter what happens with the economy.
And today, I'll be sharing with you three of these great tech dividend payers for your portfolio...
Dividends in the New Tech Sector
As a boomer of "a certain age," I can definitely understand why so many investors are on the hunt for good dividend plays.
After all, the Fed signaled just last month that it expects to keep interest rates low for several more years. The central bank wants to get the economy revving again after the COVID-19 shutdowns.
Here's the thing. As a long-time Silicon Valley investor, I have to say I've had a sea change when it comes to dividends.
A decade ago, high-yield tech stocks were rare. Back then, Silicon Valley preferred to plow cash back into the next round of growth.
But as the saying goes, that was then, and this is now. Credit the digital economy for giving tech firms more money that they can invest in their own growth. Indeed, nine tech companies in the S&P 500 alone hold more than $350 billion in net cash.
In essence, that's transformed some of the sector's biggest players from laggards to dividend leaders.
My question: Why not put those high profit margins in our own pockets?
So, as a service to retirees and dividend hunters alike, I've updated the list I provided back in March.
And I'm happy to report all three of my original picks are still going dividend-strong; they've maintained their credit ratings and payouts. Take a look...
Tech Dividend Payer No. 1: Apple Inc.
There's no question that the dividend investment thesis here is much better than when I last told you about the iDevice King in March.
At that time, Apple Inc. (NASDAQ: AAPL) had a forward dividend yield of 1.25%. Today, following its recent 4-to-1 split, the stock now has a forward yield of 2.9%.
Bear in mind, Apple sets the standard by which other consumer tech companies are judged.
Its high-margin services unit continues to ramp up sales and has become one of its biggest growth engines. Apple has said repeatedly that it's targeting $50 billion in sales here in the next few years.
AAPL has an S&P credit rating of AA+ and brings in free cash flow of more than $52 billion.
Tech Dividend Payer No. 2: Cisco Systems Inc.
Back in March, Wall Street was convinced that COVID-19 would hammer Big Tech along with the rest of the economy.
That turned out to be a gross overreaction - at least regarding companies tapping the power of the Web. With millions working from home, that infrastructure saved the economy.
And that put Cisco Systems Inc. (NASDAQ: CSCO) front and center. This is a classic networking company that has supplied products for the Web for two decades.
That's good news for dividend seekers. In June, Cisco maintained its dividend as it promised to do just weeks before.
CSCO shares currently have a forward dividend yield of 3.8%, and it has an S&P credit rating of AA- with roughly $14 billion in net cash on hand.
Plus, the firm has yearly free cash flow of $11.6 billion and has been doubling its per-share earnings every six years.
Tech Dividend Payer No. 3: Microsoft Corp.
Yes, Microsoft Corp. (NASDAQ: MSFT) was one of the first Big Tech leaders to say the coronavirus would hurt current sales. So, I can understand if you wondered about the safety of dividends when we spoke last March.
You needn't have worried. On Sept. 15, Mr. Softy said it was hiking its dividend by 10% - a pretty hefty boost in the midst of a recession.
That shows you that the firm maintains a strong balance sheet and remains shareholder-focused.
But that in no way invalidates the company's huge growth.
As evidenced by its most recent quarterly earnings report, Microsoft is making sales progress across the board.
Cloud computing was particularly strong - no surprise there. Its Azure suite of services saw a 47% increase in the most recent fiscal quarter compared to the year before.
Microsoft stock currently has a forward dividend yield of 1.5%. Additionally, it has an S&P credit rating of AAA with $54 billion in net cash on hand, plus yearly free cash flow of $34 billion.
Add it all up, and you can see why I like to remind folks that tech is the sector where you get both yield and growth.
Until the economy hit the skids because of the coronavirus panic, all three were great earnings growers.
Translation: When the economy gets moving at full speed again, so will these great tech leaders.
And that makes these three tech leaders exciting, no-brainer dividend plays in today's yield-starved market.
In the meantime, don't forget to check out my latest presentation on another exciting tech opportunity...
You see, I've pinpointed 20 stocks that I believe could triple or even quadruple your money in a year as one of the most groundbreaking technological advancements of our lifetime becomes a reality: 5G.
These are not big companies or household names. In fact, some are so obscure that few people outside Silicon Valley inner circles have even heard of them.
Yet they have the potential to deliver up to 1,000% windfalls in a year's time for folks who get in on the ground floor.
To find out how you can get the names of these 20 stocks, click here now...
Follow Money Morning on Facebook and Twitter.
About the Author
Michael A. Robinson is a 36-year Silicon Valley veteran and one of the top tech and biotech financial analysts working today. That's because, as a consultant, senior adviser, and board member for Silicon Valley venture capital firms, Michael enjoys privileged access to pioneering CEOs, scientists, and high-profile players. And he brings this entire world of Silicon Valley "insiders" right to you...
- He was one of five people involved in early meetings for the $160 billion "cloud" computing phenomenon.
- He was there as Lee Iacocca and Roger Smith, the CEOs of Chrysler and GM, led the robotics revolution that saved the U.S. automotive industry.
- As cyber-security was becoming a focus of national security, Michael was with Dave DeWalt, the CEO of McAfee, right before Intel acquired his company for $7.8 billion.
This all means the entire world is constantly seeking Michael's insight.
In addition to being a regular guest and panelist on CNBC and Fox Business, he is also a Pulitzer Prize-nominated writer and reporter. His first book Overdrawn: The Bailout of American Savings warned people about the coming financial collapse - years before the word "bailout" became a household word.
Silicon Valley defense publications vie for his analysis. He's worked for Defense Media Network and Signal Magazine, as well as The New York Times, American Enterprise, and The Wall Street Journal.
And even with decades of experience, Michael believes there has never been a moment in time quite like this.
Right now, medical breakthroughs that once took years to develop are moving at a record speed. And that means we are going to see highly lucrative biotech investment opportunities come in fast and furious.
To help you navigate the historic opportunity in biotech, Michael launched the Bio-Tech Profit Alliance.
His other publications include: Strategic Tech Investor, The Nova-X Report, Bio-Technology Profit Alliance and Nexus-9 Network.