Unlike 2008-2009, companies in the tech sector have strong balance sheets, potential to return cash to shareholders in the form of dividends, and improving top-line growth. Also, clients of these companies are now in a better financial position to spend capital on improved technology. If you believe in the forward growth of the technology sector, we researched companies that might interest you.
To create the list below we started by looking for stocks in the technology sector with a dividend of at least 1%, but not more than 5%. This allowed us to focus on companies with a strong credit profile.
We further analyzed our list of companies for strong profitability by performing DuPont analysis. DuPont analyzes profitability by breaking up return on equity (net income/equity) into three components. If the ROE is unsatisfactory, the DuPont analysis helps target the part of the business that is underperforming. Learn more about the equation here.
Those companies that pass DuPont are seeing positive trends in the sources of their increasing profitability, which adds further weight to the idea that the names are profitable.
Our final list consisted of 4 stocks.
For an interactive version of this chart, click on the image below. Analyst ratings sourced from Zacks Investment Research.
A Closer Look
We looked at Monotype Imaging Holdings Inc. (TYPE) in more detail. The company has a conservative balance sheet with cash and cash equivalents of $39 million, and long-term debt of $12 million. Also, Monotype has $120 million in borrowing capacity under its credit facility. Contractual obligations of the company are manageable, and details are included below:
The company's stock has performed well in the past 1-year, up 60%, and now trading around $21.75. The S&P North American Technology-Software Index (IGV) is up 8% in the past 1-year, 9% year-to-date, and 9% in the past 5 years.
Would you invest in Monotype?
Do you think these dividend technology stocks are attractive? Use this as a starting point for your own analysis.
1. FactSet Research Systems Inc. (FDS): Provides financial and economic information to investment community worldwide.
- Market cap at $4.32B, most recent closing price at $97.87.
- MRQ net profit margin at 23.58% vs. 23.18% y/y. MRQ sales/assets at 0.297 vs. 0.296 y/y. MRQ assets/equity at 1.214 vs. 1.237 y/y.
- Dividend yield at 1.3%.
2. NVIDIA Corporation (NVDA): Provides visual computing, high performance computing, and mobile computing solutions that generate interactive graphics on various devices ranging from tablets and smart phones to notebooks and workstations.
- Market cap at $7.91B, most recent closing price at $12.66.
- MRQ net profit margin at 15.72% vs. 12.17% y/y. MRQ sales/assets at 0.173 vs. 0.172 y/y. MRQ assets/equity at 1.328 vs. 1.339 y/y.
- Dividend yield at 2.4%.
3. QUALCOMM Incorporated (QCOM): Engages in the development, design, manufacture, and marketing of digital wireless telecommunications products and services.
- Market cap at $114.48B, most recent closing price at $66.63.
- MRQ net profit margin at 31.67% vs. 29.93% y/y. MRQ sales/assets at 0.134 vs. 0.124 y/y. MRQ assets/equity at 1.269 vs. 1.32 y/y.
- Dividend yield at 1.5%.
4. Monotype Imaging Holdings Inc. : Provides text imaging solutions worldwide.
- Market cap at $791.64M, most recent closing price at $21.39.
- MRQ net profit margin at 21.04% vs. 19.51% y/y. MRQ sales/assets at 0.12 vs. 0.107 y/y. MRQ assets/equity at 1.395 vs. 1.504 y/y.
- Dividend yield at 1.2%.
*Profitability data sourced from Finviz, all other data sourced from Finviz.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.