Tech is always an exciting sector, especially when companies can pay handsome dividends to their shareholders. Today, we focused on tech stocks that offer moderate, sustainable dividend payouts, fueled by their reliable profitability. To focus in on the best in class, we screened for only those stocks that industry analysts rate as 'Buy', or 'Strong Buy'. We came up with a rather interesting list of tech companies.
Return on Assets [ROA] illustrates how much a company is generating in earnings from its assets alone. This metric gives investors a picture of how profitable the company is relative to the assets in current possession. It also lets investors see how efficient and effective management is at generating earnings from the company's assets. While most management teams can probably make money by throwing money at an issue, very few can make very large profits with little investment.
The Net Margin is a profitability metric that illustrates, by percentage, how much of every dollar earned gets turned into a bottom line profit. This is just one of many profitability metrics used by investors and analysts to better understand what the company is being left with at the end of the day. Generally, a firm that can expand its net profit margins over a period of time will see its stock price rise as well, due to the trend of increasing profitability. Net Margin = Net Income/Total Revenue
We first looked for technology dividend stocks. We then screened for businesses that analysts rate as "Buy" or "Strong Buy" (mean recommendation < 3). We then looked for businesses with strong profitability (ROA > 10%)(Net Margin [TTM] >10%). We did not screen out any market caps.
Do you think these stocks should be trading higher? Use our screened list as a starting point for your own analysis.
1) American Software, Inc. (AMSWA)
American Software, Inc. has a Dividend Yield of 4.29%, a Payout Ratio of 75.97%, a Analysts' Rating of 1.00, a Return on Assets of 10.25%, and a Net Margin of 11.05%. The short interest was 4.21% as of 07/11/2012. American Software, Inc. and its subsidiaries develop, market, and support a portfolio of software and services that deliver enterprise management and collaborative supply chain solutions worldwide. The company operates in three segments: Supply Chain Management, Enterprise Resource Planning and Information Technology Consulting. The Supply Chain Management segment provides collaborative supply chain solutions, which include supply chain planning, inventory optimization, manufacturing, and transportation and logistics solutions to streamline the market planning, management, production, and distribution of products for manufacturers, suppliers, distributors, and retailers.
2) Analog Devices Inc. (ADI)
|Industry:||Semiconductor - Integrated Circuits|
Analog Devices Inc. has a Dividend Yield of 3.32%, a Payout Ratio of 44.39%, a Analysts' Rating of 2.10, a Return on Assets of 13.35%, and a Net Margin of 25.23%. The short interest was 1.91% as of 07/11/2012. Analog Devices, Inc. engages in the design, manufacture, and marketing of analog, mixed-signal, and digital signal processing integrated circuits [ICS] used in industrial, automotive, consumer and communication applications. The company's signal processing products involve in converting, conditioning and processing real-world phenomena, such as temperature, pressure, sound, light, speed, and motion into electrical signals. Its product range includes data converters, amplifiers and linear products, radio frequency ICs, power management products, sensors based on micro-electro mechanical systems technology and other sensors, and processing products.
3) Computer Programs & Systems Inc. (CPSI)
|Industry:||Healthcare Information Services|
Computer Programs & Systems Inc. has a Dividend Yield of 3.39%, a Payout Ratio of 65.25%, a Analysts' Rating of 2.00, a Return on Assets of 34.81%, and a Net Margin of 14.70%. The short interest was 7.80% as of 07/11/2012. Computer Programs and Systems, Inc., a healthcare information technology company, designs, develops, markets, installs and supports computerized information technology systems to small and midsize hospitals in the United States. Its enterprise-wide system automates the management of clinical and financial data across the primary functional areas of a hospital. The company offers services that enable customers to outsource certain data-related business processes in the areas of clinical care, revenue cycle management, cost control, and regulatory compliance.
*Company profiles were sourced from Finviz. Financial data was sourced from Finviz and Yahoo Finance.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.