Many people don’t know it, but tech companies account for nearly 15% of total dividend payouts for the S&P 500 Index. That’s the single largest sector contribution among the 10 broad sectors; and it’s triple what tech stocks delivered a decade ago, according to S&P Dow Jones Indices. For investors focused on dividends in tech companies, one cue could be cash. Cash represents as much as 25% of the valuation of some tech stocks. For investors, that cash might indicate significant potential for growth in dividend and growth in general.
Market Realist – Technology stocks could see an increase in dividend yield.
The graph above shows the market capitalization along with the cash and equivalents of some of the top technology companies (IYW). These companies generated an enormous amount of cash over the last few years.
By market capitalization, Apple (AAPL) is by far the biggest company in the US. It has a market cap of ~$750 billion and ~$194 billion in its reserves. Microsoft (MSFT) also generated a huge amount of cash and equivalents—this is ~25% of its market cap. Oracle (ORCL) has cash and equivalents of $43.7 billion—this is ~23% of its market cap.
Over the last six years, Apple’s earnings grew at a CAGR (compound annual growth rate) of 42.5%—this is astonishing! Google’s (GOOG) earnings grew at a CAGR of 16.7% during the same period. Cisco (CSCO) maintained double-digit earnings growth at 10.1%. IBM’s earnings hardly budged in the last six years.
Robust earnings growth, low leverage, and financial stability could cause mature tech companies to increase dividends by a large margin in the future.
Today, biotech is one of the hottest investment areas. It's driven by the demand for effective treatments and new cures. Stocks had strong growth in recent years.
Verizon Communications stock (VZ) closed down 2.09% on Tuesday after the leading US mobile carrier reported mixed results for the first quarter of 2019 before the market bell yesterday.
Several European auto companies want Nokia’s (NOK) patent business subjected to an antitrust probe.
The first-quarter semiconductor earnings season has begun, and the stock market is showing bullish sentiment as investors buy ahead of earnings releases.
Netflix (NFLX) is working its way through a series of price increases in several markets, including the United States and parts of Europe.
Netflix (NFLX) is aiming to add 14.6 million paying subscribers in the first six months of 2019.
Earlier today, the second-largest US automaker, Ford Motor Company (F), announced a plan to invest $500 million in Plymouth-based automotive company Rivian.