This Tech Stock Has A New Buy Rating And 11.3% Yield

Aug.29.12 | About: TICC Capital (TICC)

Investors are always seeking income, and that has pushed up many dividend stocks. A traditional dividend stock like Exxon Mobil Corporation (NYSE:XOM) now yields only about 2.6%, and in many cases it is even tougher to get a meaningful dividend or any dividend at all from a tech stock. Cisco Systems, Inc. (NASDAQ:CSCO) seems poised to become a favorite for income investors who want exposure to the tech sector, as it recently raised the dividend, and now yields about 2.9%. Cisco now surpasses the yield offered by Microsoft Corporation (NASDAQ:MSFT), which now generates about 2.6%. (Microsoft trades well above its 52-week low of around $24, and that is why the stock doesn't offer the yield it used to provide.) While these large-cap stocks can make for solid long-term investments and be core holdings in a portfolio, the yields are diminutive when compared to some smaller capitalization companies in the tech sector.

Even one of the highest-yielding tech stocks like Intel Corporation (NASDAQ:INTC), which has a 3.6% yield, can't even come close to what TICC Capital Corp. (NASDAQ:TICC) yields, which is about 11.3%. This company will offer about as much dividend yield in a single year as Intel might offer in about four years. While it might offer more risk, it certainly appears to reward investors for this. Here is a closer look at the company:

TICC Capital Corp., is set up as a business development company. This special status allows it to generate and pay a very generous dividend. TICC focuses on providing capital to technology-related companies. It typically invests in companies that have annual revenues of less than $200 million and/or a market capitalization or enterprise value of less than $300 million. It invests in a wide range of tech companies including: Computer software and hardware, information technology, Internet, networking systems, medical device technology, telecommunications, semiconductors, and others.

Here are three reasons to consider the stock now:

1) Analysts at Zacks Investment Research recently upgraded this stock with a buy rating. When analysts back a stock, it can lead to increased exposure with investors, and even a higher share price.

2) TICC makes investments in tech companies in a variety of ways, which include senior secured debt, senior unsecured debt, subordinated debt, junior subordinated debt, preferred stock, and common stock. In some cases, it has investments at very high levels of the capital structure - which reduces risks for investors and adds to the safety of the dividend.

3) Since 2009, this company has been raising its dividend. In the past three years, it has jumped from 15 cents per quarter and nearly doubled to 29 cents per share. The dividend was raised to 29 cents from 27 cents for the September dividend that is due to be paid on the 28th.

TICC shares have been in an uptrend, so it makes sense to buy on pullbacks. With an 11.3% yield, and while offering investors exposure to the tech sector, this stock could be poised to outperform more traditional dividend stocks.

Here are some key points for TICC:

  • Current share price: $10.36
  • The 52 week range is $7.07 to $10.65
  • Earnings estimates for 2012: $1.20 per share
  • Earnings estimates for 2013: $1.15 per share
  • Annual dividend: $1.16 per share, which yields about 11.3%

Data is sourced from Yahoo Finance.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

Disclaimer: No guarantees or representations are made. Hawkinvest is not a registered investment advisor and does not provide specific investment advice. The information is for informational purposes only. You should always consult a financial advisor.