The technology sector is a one of the better performing sectors over the last twelve months. The Technology SPDR ETF (NYSE: XLK) is up 23% over the last 12 months. This compares favorably to the S&P index 12 month gain of 18.28%. However, in the past three months the sector has underperformed the S&P 500 index by nearly 2%. Here are some of the big technology winners in the past three months;
|Micron Technology Inc||35.17|
|Akamai Technologies Inc||29.54|
|Western Digital Corp||27.08|
|Dell Technologies Inc||22.15|
|Analog Devices Inc||17.62|
|Applied Materials Inc||17.21|
|Juniper Networks Inc||16.75|
|Check Point Software||15.48|
|Texas Instruments Inc||10.09|
|Lam Research Corp||9.89|
|International Business Machines||9.28|
|Maxim Integrated Products||7.8|
Source: Yahoo Finance
Historically, many technology companies, especially younger companies within the sector, do not pay dividends. These companies typically prefer to invest profits back into their company to improve innovation, rather than reward shareholders with dividends. Many stocks in the list above do not share net income with shareholders.
The Information Technology sector is trading at 16.6 earnings estimates for 2017 versus 17.1 for the S&P 500. The sector also has positive earnings revisions. The sector recorded positive expected earnings growth since the start of the fourth quarter, from 4.3% to 5.9%. Secondarily, over half of the companies in the sector have witnessed an actual increase in the mean EPS analyst estimate as well.
For dividend investors there are plenty of great options in this relatively undervalued sector. These are some of my top picks in the sector, that are expected to have attractive returns along with great dividend yields and growth.
Intel Corporation (NYSE: INTC) is down nearly 1% in the past three months. The stock has been range-bound since 2015. It has substantially underperformed its competitor Qualcomm (NASDAQ:QCOM). The stock was recently named a top pick at Wells Fargo. Cloud computing and data services should continue to provide Intel with increased growth prospects in 2017. It currently offers a dividend yield close to 3%, which is above its peers in the semiconductor industry. The company has been paying dividends since 1992, and has increased its dividend during most years. The company recently announced its plan to purchase a 15% stake in mapping company, to increase its presence in the self driving car industry. The stock trades at just over 13 times the average estimate of $2.82 for fiscal year 2017. Intel is my top stock within the sector for the next twelve months and currently ranks 2 on my Top 100 Dividend Stocks list.
International Business Machines (NYSE: IBM) offers a dividend yield around 3.3%, compared to the average dividend yield of about 2.8% in the computer systems industry. IBM has been paying dividends for over 100 years, since 1913 and has been raising its dividend ever year consecutively since 2000. Despite a few bumps in the road last year related to the company's acquisitions, the stock soared compared to its sector last year. Dividend investors also saw an 8% annual increase from $1.30 to $1.40 to IBM's quarterly dividend last April. IBM currently trades at just over 12 times next year's expectations for earnings. The stock advanced by over 8% in the past three months. It ranks 16 on my Top 100 Dividend Stocks list.
Infosys Ltd ADR (NYSE: INFY) is an India-based ADR that currently offers a dividend yield of about 1.9% (compared to an average dividend yield of 1% in the business technology services industry). Since the company trades on the New York Stock Exchange as an ADR, its semi-annual dividends are irregular and unpredictable. However, on an annualized basis, the company has been raising its dividend every year since 2013. Although its share price declined last year, the company will likely benefit from a stronger global economy in 2017. The appointment of CEO Vishal Sikka in 2014 should continue to reinvigorated the company's growth going forward. It trades at just over 16 times earnings estimates of $1.01 in 2017. Infosys currently ranks 18 on my Top 100 Dividend Stocks list.
Cisco Systems, Inc. (NYSE: CSCO) stocks was down nearly 3% in the past three months. However, the stock rose by over 15% in 2016. The firm is also a buyback machine, purchasing over $5 billion in stock in fiscal 2016, which continues a strong trend of share repurchases (over $10 billion) in 2014 and 2015. It currently has a dividend yield of about 3.5%, compared to the industry average of just 1.15%. The company has been paying its shareholders a dividend since 2011, and has boosted its payout every year since the inception of its dividend. Last year, Cisco increased its dividend by 24%. The technology firm just announced an extension of its partnership with LM Ericsson (NASDAQ:ERIC) in the Evolved Wi-Fi Network arena. The partnership will allow the firms to provide network systems to a multitude of vendors including telecommunication providers and in public arenas like stadiums and malls. Cisco currently ranks 39 on my Top 100 Dividend Stocks list.
Seagate Technology PLC (NASDAQ:STX) has a dividend yield of over 6%, which is well above the average dividend yield in the data storage device industry. The company had been increasing its quarterly dividend every year since 2011, but maintained its current $0.63 dividend for the fifth consecutive quarter. This is likely due to falling revenue, due to lower demand in the hardware industry. Despite its lagging revenues, the stock's share price is positive over the last year. Seagate Technology currently ranks 40 on my Top 100 Dividend Stocks list.
KLA-Tencor Corp (NASDAQ:KLAC) is up 11% in the past three months. Despite the price rise, the stock is still undervalued. It offers a dividend yield of approximately 2.7%, which is well above the average dividend yield of 1.5% in the semiconductor equipment industry. KLA has been offering shareholders a dividend since 2005 and has been raising its dividend every year since 2010. The company recently announced a 4% increase to its quarterly dividend from $0.52 to $0.54. The stock had strong performance in 2016, and many analysts are optimistic on the company going forward. KLA-Tencor currently ranks 58 on my Top 100 Dividend Stocks list.
Oracle Corporation (NYSE: ORCL) has only advanced by just over 2% in the past three months. It currently yields at around 1.55%, which is well above the average yield in the application software industry, which is less than 1%. The company has been paying dividends since 2009 and has been increasing dividends consecutively since 2012. Over the last year, Oracle has come out in the positive, but has seen a lot of volatility due to the election. Oracle's most recent earnings release sent the stock plummeting, as the company missed estimates and saw lower revenues. Despite the miss in earnings, analyst estimates have stopped descending. Oracle currently ranks 61 on my Top 100 Dividend Stocks list.
Microsoft Corporation (NASDAQ: MSFT) is up 10% in the past three months and offers a dividend yield of about 2.5%, compared to the industry average of just 0.90%. The tech giant has been paying dividends since 2003 and has been increasing its payout every year since 2004. Microsoft had an eventful year in 2016, with its $26 billion acquisition of LinkedIn being a highlight. Microsoft should continue its strong run in profits this year through continued growth in cloud computing and Xbox sales. Microsoft currently ranks 73 on my Top 100 Dividend Stocks list.
Qualcomm's stock price is flat in the past three months. The company maintains a dividend yield of about 3.2%, compared to the average yield of its peers of 2.5%. Since 2003, the company has been paying a dividend and increasing its payout every year. In 2016, the company's financials were solid while share price was enhanced by continued share repurchases. Qualcomm currently ranks 90 on my Top 100 Dividend Stocks list.
Disclosure: I am/we are long CSCO, MSFT, ORCL.
I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it. I have no business relationship with any company whose stock is mentioned in this article.