More Tech Companies Mature into Dividends

The past week marked an increase in positive dividend news from major companies. The most bullish news came from software giant Oracle (ORCL), which declared its first ever quarterly dividend of $0.05/share. Most of the large cap tech companies from the dot-com boom eras are now mature plays on the sector. They could now afford to share an increased portion of their revenue streams with shareholders.

Cisco Systems (CSCO) is another major tech company, which announced its intent to pay a dividend eventually back in November 2008. The evolution of the large cap former tech bellwether darlings of Wall Street from the 1990’s is astonishing. As stocks like Intel (INTC), Microsoft (MSFT) and Cisco Systems are no longer growing as rapidly as they used to and become mature companies, they start distributing larger portions of their net incomes to shareholders in terms of dividends. The more important question however is whether these companies will continue paying out rising dividends to shareholders after the dividend tax is repealed.

Realty Income (O) and Air Products and Chemicals (APD) were two other companies, which rewarded their shareholders with dividends.

The board of Air Products increased the quarterly dividend on the company's common stock to 45 cents per share from 44 cents. This marked the 27th consecutive annual dividend increase for the Allentown, Pennsylvania maker of atmospheric gases, process and specialty gases, performance materials, and equipment and services worldwide. Air Products and Chemicals, Inc. is the sixteenth dividend aristocrat to raise its dividends in 2009. Check out my analysis of Air Products and Chemicals.

Realty Income, which engages in the acquisition and ownership of commercial retail real estate properties in the United States, raised its dividends to $0.1420625 per share from $0.14175 per share. This is the 46th consecutive quarterly increase for this dividend achiever and the 53rd dividend increase since Realty Income went public in 1994. The new monthly dividend amount represents an annualized dividend amount of $1.70475 per share. Realty Income currently yields and is one my Best High Yield Dividend Stocks for 2009. Check out my analysis of Realty Income (O).

Disclosure: Author is long O and APD

Comments

[Big K:]

I agree about O. In fact I'm counting on it, as I'm long as well. It has been a volatile stock, however. I bought in a 23, and reinvested dividends, reducing my cost basis now to 20. I could have sold last summer when the stock oddly spiked up to $34-$35 range. It would have been a good trade because I could have picked it back up here recently at $15, more than doubling my shares. I like buy-hold-and-DRIP, but am thinking that one can also trade some on the side, as a supplemental strategy.

Good news to hear about ORCL. This is a mature business now, and they can easily spread the wealth with their shareholders.

Mar 23 07:51 PM

[Chris B:]

Tech companies live and die on disruptive technological breakthroughs, and if they're not producing the next innovation, they're dying. Historically, it has never been the established players who produced these breakthroughs. Technological geniuses always have more incentive to start their own companies, and venture capital is always widely available. That's why Google's founders didn't just get jobs at Yahoo. The result is a constant churn in market dominance and market creation, and the eventual shrinkage of older companies.

Intel - an appliance maker, outsourcing the production of a commodity for consumers who have little incentive to upgrade b/c of internet bottlenecks. The next Whirlpool.

Cisco - here come the Chinese servers! The next RCA.

MSFT - the next GM, no coherent web strategy, unreliable products, no response to open source or cloud computing, certainty that dominant position will hold forever, etc.

Mar 25 04:30 PM

[naidle:]

I'm not sure I'd feel comfortable comparing MSFT with the likes of GM. I understand your point that MSFT will struggle based on the competitive landscape and deterioration of their product/services but to compare them to a company who doesn't understand basic accounting (spend less than you make) isn't fair.

MSFT has shown over time that although it's not growing like Google, it understands how to balance its books, maintain dividends without damaging future growth.

I don't like MSFT either but that comparison isn't fair.

Mar 25 11:23 PM

[Lightway:]

Tech companies don't have to be the wonderkid-growth type companies anymore. That was the model during the late 1990s, but most of the companies mentioned in this article, are IT infrastructure companies, upon which those disruptive technologies are built. Think of companies like Oracle, Cisco, Microsoft, HP, IBM, and Intel as the bridges and highways of the technology world.

I don't understand why people count Microsoft out, their servers and SQL Servers are ubiquitous in pretty much any office that has an IT shop, no matter how advanced the technology or the scale of it.

Mar 26 04:18 AM