Heads up: tech stock dividends!

Short post for this Saturday evening. Florida Gators are playing Kentucky as I type! Gotta get back to the game.

I love dividends. I worked in the technology industry for 20+ years. But that’s about where the relationship normally ends between dividends and technology stocks. Tech stocks are growth stocks right and one buys them for price appreciation right? True in the past but that may be changing.

More and more investors are searching for dividends. This is partly due to the low yields available in traditional income products like bank accounts, CDs, bonds, etc. This is also do to the last decade of negative stock returns for the S&P500. On the other hand, growth for technology companies is becoming harder to come by and/or they need less capital to generate the growth rates they can achieve. The result has been a huge cash pile up on the balance sheets of technology companies. For example. Microsoft has over $30B in cash.

Well, tech companies are starting to wake up. Intel has paid a nice dividend for a while and has increased it significantly. Microsoft seems to be waking up and just hiked their dividend 20%+. And as if hell just froze over, Cisco just announced that they would start paying a dividend in 2011. Barron’s had a good article about tech stock dividends that I would recommend reading.

So, in general, I think its too early to consider tech stocks as a good dividend sector but its worth paying attention to them. There are some standouts like Intel that may be worth investing in but tech companies need to increase their payouts in order for dividend investors to take real notice. But if/when the tech companies do change this sector will offer good dividend yields plus great opportunities for dividend growth.

Its great to catch a trend in its early stages and this maybe be a great opportunity in the making. I’ll keep and eye on it and post on it regularly.