IBM has the highest yield in this stock screen, above 5%.
Carabiner/DreamstimeThe 72 technology stocks in the S&P 500 were recently yielding about 1% on average, hardly an enticing prospect for income investors. Looking a bit more closely, however, investors can find some yields worthy of attention.
In this particular stock screen, Barron’s looked for S&P 500 technology stocks with yields above 2% and market capitalizations of more than $50 billion.
Companies such as Microsoft (ticker: MSFT) and Apple (AAPL) didn’t make the cut—though both companies have been increasing their dividends consistently. Microsoft’s yield is 1.1%, and Apple’s is 0.7%. Microsoft recently declared a quarterly dividend of 56 cents a share, up nearly 10% from 51 cents.
Still, the screen revealed some higher-yielding stocks whose dividends have been maintained or, in one case, increased during the pandemic.
That distinction belongs to Texas Instruments (TXN), which in mid-September said it would boost its quarterly payout by 13%, to $1.02 a share from 90 cents. The chip maker’s stock yields 2.9%. It’s up about 12% year to date, dividends included.
Tech Dividends
Technology stocks are not known for their big yields, but these six S&P 500 names are bucking that trend.
Note: recent prices and returns as of Oct. 2; other data as of Oct. 5.
Source: FactSet
The other five stocks that met the screen’s criteria have all maintained their dividends this year.
IBM (IBM), whose stock has returned about minus 7% year to date, sports the highest yield among these six companies at 5.4%.
The company earned $2.18 a share in the second quarter, nine cents better than the consensus, according to FactSet. However, as Barron’s pointed out, while the cloud computing business was strong, other businesses weakened, including IBM’s consulting operation.
In late July, the company declared a quarterly disbursement of $1.63 a share, in line with its previous payout.
Shares of Cisco Systems (CSCO) have struggled even more than IBM’s have, down about 17% so far this year. Reflecting that performance, the stock’s yield is 3.8%, second highest among the stocks in our screen. The consensus FactSet earnings estimate for the current fiscal year, which ends in July, is $3.08 a share, down from $3.21 in the fiscal year just ended.
In August, the computer networking company provided disappointing guidance for its current quarter, causing the shares to slide. Cisco, however, has maintained its quarterly dividend at 36 cents a share.
Automatic Data Processing’s (ADP) stock is another laggard, having lost about 17% this year.
The company, whose products include payroll services, has faced headwinds during the pandemic. Its “shares are apt to track broader US employment data,” according to a Cowen research note last month, referring in part to the spike in unemployment during the pandemic.
During the company’s fiscal fourth-quarter earnings call in late July, CEO Carlos Rodriguez said the company had paid about $1.5 billion of dividends and repurchased about $1 billion of its stock over the recently ended fiscal year.
“This kind of short-term hit that we’re having to revenues and to profitability, I don’t believe will impair our ability to continue that tradition of returning cash to our shareholders,” the CEO said.
The consensus FactSet for the company’s current fiscal year, which ends next June, is $5.01 a share, down from $5.92 in its most recent fiscal year.
The stock yields 2.6%.
The two best year-to-date performers among these six tech companies are Qualcomm (QCOM) and Broadcom (AVGO). The shares of these two chip companies are up about 34% and 17%, respectively, including dividends.
Qualcomm, which recently yielded 2.3%, in July kept its quarterly dividend at 65 cents a share.
Broadcom continues to pay a quarterly disbursement of $3.25 a share, most recently last month.
Write to Lawrence C. Strauss at lawrence.strauss@barrons.com
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October 07, 2020 at 05:00PM
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The 72 Tech Stocks in the S&P 500 Yield 1% on Average. These 6 Yield More Than 2%. - Barron's
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