This basket of tech stocks can provide growth AND income
Back during the full tilt boogie late 90's, hope was the dividend that all tech stocks paid: you bought 'em and hoped they went up. For a while, thanks to crowd psychology and dumb luck, that's what happened. It was hard for people to get excited over a 4 or 5% dividend yield when you could buy shares of Maxipads.com at 110 in the morning and sell it at 125 that afternoon. That was then. This is now.
As the tech companies that would survive and matter grew and matured, cash piled up like cordwood on their balance sheets while, for the most part, their stock prices have languished and underwhelmed thanks to the grinding, decade plus long bear market we've been lucky enough to enjoy for … well … over a decade. So what did most of the tech giants do? What most well run companies do. They bought back shares of their own stock while the prices were low and they started returning capital to their shareholders in the form of a radical new concept (sarcasm intentional) called a "dividend".
Even Apple Computer (AAPL) has paid lip service and initiated an incredibly generous dividend of less than half of one percent. I think AAPL is still adhering to the "hope dividend" philosophy as is much of the investing herd. Everyone is hoping AAPL goes to a bazillion dollars a share. I hope they're not too terribly disappointed.
However, there are plenty of technology facing stocks that pay what are considered more than decent dividends. Here's a nice little basket.
1. Intel (INTC): The king of chips is shifting its focus from the desktop/laptop (although they still control 80% of that market) space to the "everything else that requires chips" space. Mainly smart phones and tablets, but also cars, refrigerators … you name it. Awesomely well run company. Mountains of cash. They've been raising the dividend at a respectable double digit rate for the last few years. Currently yielding just under 3% (try to buy when the yield is 3 or better) and trading at less than 12 times forward earnings.
2. Microsoft (MSFT): AAPL's less sexy arch rival rewards shareholders with 2.57% and a sub 12 forward P/E (cheap for a company that huge). Sure. Their stumbling in the smartphone space. Who knows if they'll ever get a toe hold? But you know what? Millions of hacks like me are typing articles like this in Microsoft Word as you read this on Internet Explorer Whatever. 2 and I'm pretty sure that MSFT is getting paid somehow just like when "Yesterday" plays on the Muzak in a million grocery stores all over the world, Paul McCartney and John Lennon's estate get enough cash flow to buy a loaded Toyota (NYSE:TM) Prius.
3. Corning (GLW): Wait a second? A glass company? Yes. A glass company that makes tens of thousands of miles of fiber optic cable and perfected the bad ass product commonly known as Gorilla Glass that endures blows on your smartphone touch screen as you try to get to the next level of Angry Birds.. Big, old company that trades at 10 times forward earnings and pays you 2.2%. They sell Gorilla Glass to Apple and Samsung (OTC:SSNLF), and HTC (HTC), and you get the picture.
4. AT&T (T): Ma Bell is the gate keeper and toll collector for the data flowing to your iPhone. They were the first to sell the iPhone and the iPad. Unlimited data is no longer an option and your wife isn't going to give up Pintrest. Pay up … Charlie. Huge company. Awesome brand. 13 times forward. 5.75% dividend. 'Nuff said.
5. United Online (UNTD): This is my outlier. Tiny, little $400 million company. But, an interesting, fringe e-commerce/social media play. They own Classmates.com, Reunion.com, as well as Teleflora and FTD.com. Interesting little portfolio. Looks ripe for private equity to me. 7 times forward earnings [don't look for a metric like that for Facebook (NASDAQ:FB)] and an 8.7% yield. Danger Will Robinson! This one is more likely to get smacked around … BAD than the others are.
So there you go. A nice little basket of mostly high quality tech stocks. The combined yield is around 4.4%. Not too shabby. You get to hold some tech AND you get paid for real.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.