A Note on Tech Sector Dividends

The tech sector used to be a growth only sector many years ago. They did not pay any dividends. At the height of the dot com boom many tech companies made no profits at all. So dividend payments were out of the question. Since investors were looking for mostly growth they did not worry about earning income from the sector.

However the tech sector has changed a lot since that time. Today many of the large-cap tech firms have huge cash piles that they are able to return to shareholders in the form of share buybacks and dividends and focus on growth according to an article by Ben Lofthouse at Janus Henderson. Some examples of such companies are Cisco(CSCO), Nintendo, Qualcomm(QCOM) and Apple(AAPL).

The tech sector’s dividend yield has risen significantly since the peak of the dot com era. The chart below shows the growth dividend yield or the MSCI Information Technology Sector Index:

Click to enlarge


Source: Technology Pays Dividends, Janus Henderson

The aggregate dividend yield on the index was 1.50% as of February this year. However of the 165 constituents in the index the yields vary widely among the individual stocks.

It should be noted that some of the popular names in the sector such as the FANG stocks(Facebook, Amazon, Netflix and Alphabet(GOOG)) still do not pay a dividend.

Some of the top dividend payers in the tech sectors include Cisco(CSCO), Qualcomm(QCOM) and Apple(AAPL), Microsoft(MSFT), Intel(INTC) and Taiwan Semiconductor(TSM).

The key takeaway for investors is that the tech sector now pays dividends but the yield is still low but growing. Investors have to very selective in picking names for both growth and income.

Disclosure: No Positions

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