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Recently, we discussed a defensive investing strategy for the S&P 500 Services sector and we argued that investing in high dividend yielding services stocks may be a better option for the near future.

Defensive investing with high dividend yielding stocks is a valuable strategy especially in inflationary environments. In bull markets, defensive investing may not bring in the best returns for investors. Though, it provides better protection in down markets.

This strategy can be applied to the Technology sector as well. As markets performed well since last year, low dividend Tech stocks may have benefited from the uptrend so far. However, we believe investors should be cautious about the upcoming inflationary environment. In order to be protected for the downside, now may be a good time to play more defensive and pick stocks with high dividend yields.

We compiled a list of the top 30 S&P 500 Technology Stocks (The sector classifications are sourced from Finviz and the market data are sourced from Fidelity) by market cap and ranked them based on their annualized dividend yields. The stocks with dividends and no dividends, and their performances are shown below:

STOCKS WITH DIVIDEND YIELDS

Dividend Yield

YTD Return

52-Week Return

CenturyLink Inc.

[[CTL

9.11%

-28.70%

-6.08%

AT&T Inc.

T

6.21%

-1.63%

9.14%

Verizon Communications

VZ

5.89%

-3.78%

16.99%

Intel Corp.

INTC

4.18%

-1.85%

0.75%

Automatic Data Processing Inc.

ADP

3.15%

0.02%

12.66%

Applied Materials Inc.

AMAT

2.89%

-20.27%

-4.48%

Microsoft Corporation

MSFT

2.61%

-11.21%

-2.12%

Motorola Solutions Inc.

MSI

2.23%

-33.95%

-24.93%

Texas Instruments Inc.

TXN

1.99%

-18.46%

3.56%

QUALCOMM Inc.

QCOM

1.82%

-3.76%

20.88%

IBM Corp.

IBM

1.80%

14.71%

28.11%

Cisco Systems Inc.

CSCO

1.72%

-30.58%

-43.31%

Hewlett-Packard Company

HPQ

1.56%

-26.43%

-27.01%

Corning Inc.

GLW

1.49%

-30.37%

-28.55%

Broadcom Corp.

BRCM

1.13%

-26.19%

-12.36%

Oracle Corp.

ORCL

0.92%

-16.44%

8.01%

AVERAGE

-14.93%

-3.05%

STOCKS WITH NO DIVIDEND YIELDS

Dividend Yield

YTD Return

52-Week Return

Apple Inc.

AAPL

0.00%

9.50%

34.94%

Google Inc.

GOOG

0.00%

-8.07%

8.05%

EMC Corporation

EMC

0.00%

-3.93%

7.47%

Dell Inc.

DELL

0.00%

2.95%

7.47%

Cognizant Technology Solutions

CTSH

0.00%

-15.98%

0.51%

American Tower Corp.

AMT

0.00%

-10.24%

-0.86%

Salesforce.com

CRM

0.00%

-5.36%

20.06%

NetApp Inc.

NTAP

0.00%

-28.48%

-8.39%

Yahoo! Inc.

YHOO

0.00%

-33.31%

-22.99%

Intuit Inc.

INTU

0.00%

-16.96%

0.74%

Symantec Corp.

SYMC

0.00%

-4.42%

22.70%

Agilent Technologies Inc.

A

0.00%

-21.41%

9.19%

Adobe Systems Inc.

ADBE

0.00%

-22.32%

-19.00%

Citrix Systems Inc.

CTXS

0.00%

-14.95%

-0.27%

AVERAGE

-12.36%

4.26%

In the last 52-week period, the average return of 16 dividend yielding S&P500 Technology stocks was -3.05%. The second group of 14 stocks with no dividend yields performed much better in the same period as we expected, returning 4.26% on average. However, these two groups haven’t performed that differently since the beginning of the year. The average YTD return of the first group was -14.93% vs. -12.36% for the second group. As the returns of the two groups are comparable this year, it seems now is a good time to switch to dividend yielding technology stocks.

Here are the top 10 S&P 500 Technology stocks with the highest dividend yields:

CenturyLink Inc.: CTL is a leading integrated communications company. CTL has a high dividend yield of 9.11% but lost -6.08% during the past 12 months. CTL also performed negatively in 2011, losing -28.70% year-to-date. The stock has a market cap of $20.25B and P/E Ratio of 14.29. Steven Cohen had more than $200 Million in CTL at the end of March 2011. (See Steven Cohen’s other top holdings here)

AT&T Inc.: T is a leading telephone and television services provider. T has a high dividend yield of 6.21% and gained 9.14% during the past 12 months. T recently traded at $27.70 and returned -1.63% since the beginning of this year. The stock has a market cap of $171.32B and P/E Ratio of 8.77. Phil Gross holds nearly $400M of T. Cliff Asness, George Soros, D.E. Shaw and Jim Simons are also among T investors.

Verizon Communications: VZ is a global telecommunications company. VZ has a 5.89% dividend yield and returned 16.99% during the past 12 months. VZ performed negatively in 2011, losing -3.78% year-to-date. The stock has a market cap of $99.21B and P/E Ratio of 14.79. Phill Gross' Adage Capital invested more than $150 Million in VZ. (Check out Phill Gross’ favorite stock picks)

Intel Corp.: INTC is a leading technology company providing microprocessor products worldwide. INTC has a 4.18% dividend yield and returned 0.75% during the past 12 months. INTC recently traded at $20.11 and returned -1.85% since the beginning of this year. The stock has a market cap of $106.62B and P/E Ratio of 9.10. Ken Fisher, Paul Ruddock, Jim Simons and Phill Gross are prominent INTC investors.

Automatic Data Processing Inc.: ADP is one of the leading providers of integrated computing services in the world. ADP has a 3.15% dividend yield and returned 12.66% during the past 12 months. ADP recently traded at $45.65 and returned 0.02% since the beginning of this year. The stock has a market cap of $24.19B and P/E Ratio of 19.28. Jean-Marie Eveillard’s First Eagle holds more than $150 Million of ADP.

Applied Materials Inc.: AMAT is a US company that provides equipment products and software to several manufacturing industries worldwide. AMAT has a 2.89% dividend yield but lost -4.48% during the past 12 months. AMAT also performed negatively in 2011, losing -20.27% year-to-date. The stock has a market cap of $15.08B and P/E Ratio of 9.61. Ken Fisher has the largest AMAT position, holding more than $600 Million of the stock. (Check out Ken Fisher’s other top stocks)

Microsoft Corporation: MSFT is a multinational company providing a wide range of software products and related services worldwide. MSFT has a 2.61% dividend yield but lost -2.12% during the past 12 months. MSFT also performed negatively in 2011, losing -11.21% year-to-date. The stock has a market cap of $215.15B and P/E Ratio of 9.55. Ken Fisher, Boykin Curry, Jean Marie Eveillard and Bill Miller are prominent MSFT investors.

Motorola Solutions Inc.: MSI is an American company providing telecommunications equipments worldwide. MSI has a 2.23% dividend yield but lost -24.93% during the past 12 months. MSI performed worse since the beginning of this year, losing -33.95% year-to-date. The stock has a market cap of $14.46B and P/E Ratio of 22.65. Carl Ichan had more than $1.3 Billion in MSI at the end of March 2011.

Texas Instruments Inc.: TXN is one of the leading manufacturers of semiconductors in the world. TXN has a 1.99% dividend yield and returned 3.56% during the past 12 months. TXN performed negatively since the beginning of this year, losing -18.46% year-to-date. The stock has a market cap of $31.57B and P/E Ratio of 10.46. Bill Miller has the largest TXN position among the 300-plus funds we are tracking.

QUALCOMM Inc.: QCOM is an American corporation providing digital wireless telecommunications products and related services. QCOM has a 1.82% dividend yield and gained 20.88% during the past 12 months. QCOM performed negatively since the beginning of this year, losing -3.76% year-to-date. The stock has a market cap of $85.70B and P/E Ratio of 19.47. Lee Ainslie, Phillippe Laffont, Stephen Mandel and Bill Miller are prominent QCOM investors (see Bill Miller’s top stock picks).

Source: Investing in High Dividend Tech Stocks