Tech Dividends – It’s a Thing Now
- Joshua M Brown
- January 13th, 2013
Dividend used to be a dirty word in the tech sector, investors would look at any cash payout as an indication that a company was hopelessly out of ideas and better ways to spend the money.
That changed with Microsoft in the last decade, followed by Intel and Cisco. They were too big, throwing off too much free cash, there really wasn’t any choice. Apple’s cannonball into the pool has made it official – tech dividends are here to stay. The shame is gone.
Here’s Floyd Norris with a surprising fact:
S.&P. Dow Jones Indices reported that in 2012 the technology sector accounted for 14.7 percent of all dividends paid to investors in the 500 companies, up from 10.3 percent in 2011 and from a little over 5 percent back in 2004. It replaced the consumer staples sector, which had been the largest payer of dividends for the previous three years.
The change was largely because of the decision by Apple, now the most valuable company in the world, to begin paying dividends last year. The company had been public for more than three decades before it announced plans in March to begin making payouts. Four other technology companies in the index — all but one of which had been public for more than two decades without paying a dividend — later joined in making payments to shareholders.
With those changes, 60 percent — 42 — of the 70 technology stocks in the index are now dividend payers. The dividends from many technology companies are relatively small, however, and of the other sectors, only health care comes close to having as large a share of companies that do not pay dividends.
Times change. Don’t be shocked to look at the top ten holdings of your large cap value fund and find it loaded with technology companies. They’re all grown up now and paying their shareholders current income in spades.
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The Reformed Broker is a blog about financial markets and the economy. Joshua Brown is a New York City-based investment advisor for high net worth individuals, charitable foundations, retirement plans and corporations... More.