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The American economy is going through a soft patch. Unemployment is stubbornly high, headline inflation numbers are rising and the stock market declined by more than 7% since early May. One of the most important problems facing the U.S. economy is the unsustainably high budget deficits. We don’t think long-term interest rates will stay low for a very long time. We believe treasury bond investors can do much better by switching to dividend yielding stocks than the 10-year treasuries that yield a paltry 3%.

Dividend yielding tech stocks is definitely one attractive alternative. We compiled a list of dividend yielding technology stocks (the sector classifications are sourced from Finviz) and ranked them based on the number of hedge funds invested in each stock. We think we can follow the smart money and pick the dividend yielding stocks with the best prospects.

Stock

Ticker

Yield

No of Funds

Value (x1000)

Microsoft Corporation

MSFT

2.7%

93

5,378,793

QUALCOMM

QCOM

1.5%

65

3,812,055

Cisco Systems

CSCO

1.5%

51

2,993,223

Oracle Corp.

ORCL

0.8%

49

2,174,740

Hewlett-Packard Company

HPQ

1.3%

46

2,718,513

Intel Corp.

INTC

3.9%

42

2,725,519

International Business Machines

IBM

1.8%

37

2,473,693

Corning Inc.

GLW

1.1%

32

906,051

Texas Instruments

TXN

1.6%

29

1,084,439

Verizon

VZ

5.5%

28

534,758

Broadcom Corp.

BRCM

1.1%

27

345,554

Applied Materials Inc.

AMAT

2.5%

25

1,719,185

AT & T

T

5.7%

24

671,223

Automatic Data Processing

ADP

2.7%

20

304,810

Thomson Reuters

TRI

3.4%

7

135,625

Microsoft (MSFT)tops our list with 93 hedge funds having the stock in their portfolios. These hedge funds collectively invested $5.4 Billion in MSFT. Microsoft has a dividend yield of 2.7%. Jim Simons’ Renaissance, David Tepper’s Appaloosa, Leon Cooperman’s Omega Advisors, and Tom Steyer’s Farallon are some of the hedge funds that are bullish about Microsoft. Whitney Tilson is extremely bullish about Microsoft too. He predicted that Microsoft will reach $35 by the end of 2011. Greenlight Capital’s David Einhorn also likes MSFT but wants to get rid of Steve Ballmer. Einhorn expressed his investment thesis in MSFT in detail at the Ira Sohn Investment Conference (Read his entire speech here).

Qualcomm (QCOM) ranks second in our list. There were 65 hedge funds with a total investment of $3.8 Billion in QCOM. The stock has a dividend yield of 1.5%. Lee Ainslie’s Maverick and Stephen Mandel’s Lone Pine had the largest stake in QCOM among the 300+ funds we are following.

Three stocks with the highest dividend yield in our list are AT&T (T), Verizon (VZ), and Intel (INTC). Intel recently raised its dividend and now has a dividend yield of 3.9%. The real dividend monsters are Verizon and AT&T. Verizon has a 5.5% dividend yield and there were 28 hedge funds in VZ at the end of March. Phill Gross’ Adage Capital had $149 Million in Verizon and George Soros had a $65 Million position. Billionaire investor Leon Cooperman also started a brand new $78 Million position in Verizon during the first quarter. T offers a higher dividend yield of 5.7%. Phill Gross has the largest position in T as well

Disclosure: I am long T, MSFT.

Source: Smart Money Loves These Dividend Yielding Tech Stocks