Top Dividend Stocks Offering Best Yield
Technology companies are usually not the ones which make it onto the list of top dividend stocks. In fact, investors who have more of an appetite for risk pick technology companies to capture the upside potential they offer as they develop the latest gadgets and technologies for the Internet economy.
Another reason why technology companies aren’t famous for paying top dividends is that they operate in a highly competitive industry where they have to deploy a lot of cash to invest in innovations to stay in the game.
But if you’re an income investor and looking for sustained growth in your income portfolio, you need to diversify your holdings in a way that it captures all segments of the economy. Today’s startups will reach their mature business cycle in the next few years, and that may be the time when those companies start returning cash to their shareholders in the form of dividends.
I’ve shortlisted the following technology companies with a solid track record of growing dividends each quarter and rewarding their investors who believed in their business models and their ability to ward off the competitive pressures.
Top Dividend Stock: Microsoft Corporation Stock
Microsoft Corporation (NASDAQ:MSFT) stock, with a dividend yield of 2.7% may not look too enticing to you. However, it’s one of the few establish tech giants which has constantly been returning cash to investors, both by regular dividend payments and through buying back its shares.
Since 2004, Microsoft has never missed paying out a quarterly dividend. The MSFT stock dividend since then has climbed nearly 400%, making it one of the top dividend-paying stocks in the technology space. Last month, Microsoft raised its quarterly dividend by eight percent to $0.39 per share. (Source: “Microsoft announces quarterly dividend increase and share repurchase program,” Microsoft Corporation, September 20, 2016.)
An increase in dividend payouts isn’t the only way Microsoft returns cash to its investors; the company has a massive share buyback plan. Last month, the company’s board also announced another $40.0 billion buyback plan after a similar program was exhausted. (Source: Ibid.)
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Buybacks are great for investors because they reduce the company’s number of shares in the market and increase the amount of profit per share. Given that Microsoft stock currently has a market cap of around $450.0 billion, the buyback would reduce the company’s share count by nearly nine percent at today’s prices.
Top Dividend Stock: Intel Corporation
Intel Corporation (NASDAQ:INTC) stock is another top dividend-paying stock in my recommended portfolio. On top of healthy capital gains, Intel pays an approximate three-percent dividend yield, which is a very competitive return when compared with alternative investments in this low rate environment.
Intel stock, benefiting from an improved sales outlook, has outperformed the NASDAQ massively by rising about 14% in the past year, compared to over-six-percent gains in the benchmark index. During the past 10 years, Intel’s dividend payouts have surged over 150%, and in the past five years, the company’s quarterly dividend rate has increased 24%.
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Like Microsoft, Intel also has a very robust share buyback program. As of July 2, 2016, Intel had $7.8 billion available for buying back its shares under a $65.0-billion plan its board authorized in 2005. (Source: “Stock Buyback Summary,” Intel Corporation, last accessed October 18, 2016.)
Top Dividend Stock: Cisco Systems, Inc.
Cisco Systems, Inc. (NASDAQ:CSCO) is making switches and routers that actually make it possible for big companies to build huge communication networks. And Cisco has been doing this for the past three decades without making much of the noise you hear from the big tech names these days.
But one thing unique about Cisco is that it pays a hefty dividend payout. With a yielding of 3.4%, Cisco’s dividend is much higher than that of competitors like Juniper Networks, Inc. (NYSE:JNPR) at 1.7%.
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Cisco pays a quarterly cash dividend of $0.26 per share; on an annualized basis, that comes to $1.04 per share. Cisco maintains its top dividend status on this commitment that it will return at least 50% of free cash flow to investors, both in dividend payouts and share buyback plans.
In the 2016 fiscal year, Cisco has returned about $8.7 billion to investors in buybacks and dividends, representing 70% of free cash flow. (Source: “Cisco Reports Fourth Quarter and Fiscal Year 2016 Earnings,” Cisco Systems, Inc., August 17, 2016.)