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The Federal Reserve's recent decision to push interest all the way to zero has millions of investors scrambling.
Clearly, now is not a good time to be buying bonds for retirement income alone. Their rates also have plummeted.
That leaves many investors looking for good dividend yields at a time when the economy is weakening.
You need look no further than tech.
The sector has quietly come to dominate corporate balance sheets in terms of cash on hand.
That means two things. Firstly, tech is a great place to find yields. Secondly, these cash-rich firms are least likely to cut their dividends in a recession.
Indeed, nine tech companies in the S&P 500 alone hold more than $350 billion in net cash.
With that in mind, these three dividend stocks currently offer the safest yields...
The High-Tech Dividend Revolution
As a longtime tech 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 following the financial crisis that ended in early 2009, these firms found themselves awash in cash as businesses and consumers adopted a wide range of new technologies en masse.
That change has transformed some of tech's biggest players from laggards into dividend leaders.
So, as a service to dividend hunters, I put together a list of the three tech stocks least likely to cut their dividends as the economy slows.
I based that on their net cash on hand as well as positive cash flow. I then searched for those firms that have an S&P corporate bond rating of at least BBB, the lowest level that the marquis agency still considers "investment" grade.
That narrowed the list to three that offer yields that investors can likely count on in these challenging times. Take a look.
Tech Dividend Stocks, No. 3: AAPL
There's no question that Apple Inc. (NASDAQ: AAPL) sets the standard by which other consumer tech companies are judged. It redefined music listening with the release of the iPod and created the concept of the smartphone with the release of the iPhone in June 2007.
Along the way, it's now setting the standard for wearables with its fifth-generation Apple Watch. But it's not all about hardware.
Indeed, its services unit continues to ramp up sales and has become one of the company's biggest growth engines. Apple has said repeatedly that it is targeting $50 billion in sales in the next few years.
Shares currently have a forward dividend yield of 1.25%. AAPL has an S&P credit rating of AA+ has more than $90 billion in net cash on hand. It has a yearly free cash flow of $45 billion and has been doubling its per-share earnings every 4.5 years.
Tech Dividend Stock, No. 2: CSCO
While we still don't know the full extent of COVID-19's impact on the economy and technology sales, Cisco Systems Inc. (NASDAQ: CSCO) recently reinforced its commitment to maintaining a robust dividend.
During a Feb. 12 call with analysts, the firm said that it had raised dividends by 3%. The company said it was "reinforcing our commitment to returning capital to shareholders and our confidence in the strength and stability of our ongoing cash flows."
Known for a wide range of computer networking gear, Cisco equipment got a heavy workout during the crisis as millions of employees worked from home. Primarily known as a hardware firm, Cisco has become a cloud play as of late because 72% of its software is subscription-based.
CSCO shares currently have a forward dividend yield of 4%. CSCO has an S&P credit rating of AA- and has roughly $10 billion in net cash on hand. It has a yearly free cash flow of $11 billion and has been doubling its per-share earnings every six years.
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.