This week I am going to move things around some and defer the Stock Analysis to Tuesday and use today's post as a lead in.
Thomas Wolfe noted that "You can never go home again". I have always interpreted that as you can go and visit, but things will never really be the same. For me this has certainly rang true. As noted in my article 5 Lessons Learned About Investing, I used to live in an aggressive growth stock neighborhood. Over the last several months, I have contacted several of my old investing pals like MSFT, INTC , CSCO, et. al. to see what they were up to. Like me, they have all matured, grayed, balded and put on some extra pounds. However, my biggest surprise was some of them are actually really getting into dividends. Hmmm...
In a recent Motley Fool Article Get Your Dividends From ... Tech?, Susan Byrne, the founder, chairman, and chief investment officer of Westwood Holdings Group, said tech stocks "always had great balance sheets, and they generate tons of cash. Now they're paying dividends, they have very low payout ratios on their free cash flow, and they're starting to grow."
Could a tech stock actually be a good dividend investment? Tune in tomorrow, we are going to run one of my old tech stock buddies through the stock analysis ringer to determine if we squeeze out a good dividend investment.
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Tech Stocks in a Dividend Portfolio?!
Posted by D4L | Monday, January 28, 2008 | commentary | 10 comments »________________________________________________________________
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I think that QCOM will be a good dividend investment with its current low payout, good dividend growth rate, and an ok P/E ratio of about 20. I would have also recommended MCHP, but the payout seemed kinda high.. As far as tech is concerned, the sad part of the tech heavy Nasdaq 100 index is that only 31 % of companies there pay dividends. But there are some which have a history of increasing them over time.. LLTC, PAYX, EXPD,
Do we consider Telus as a tech company? How about Thomson?
Growing Dividend: I am currently holding PAYX. I have not previously considered QCOM, LLTC or EXPD, but I have added them to my prescreen list. Thanks for your thoughts.
Anon: I am not familiar with Telus or Thomson. What type of business are they in?
Best Wishes,
D4L
Telus is a cellphone company in Canada. Thomson is an electronic publisher to industries such as legal, accounting, science and finance (essentially they sell data). Thomson also bought Reuters last year who make the trading screens that Bloomberg also sells.
MSFT is a decent pick, I think. Strong balance sheet. Too much cash than what they know to do with. I'm guessting they'll grow their dividend quite well over the next few years.
Thicken My Wallet: Thanks for the info on Telus. I am still learning all the various Canadian Cos. As for Thompson, I've always referred to it as Thompson Financial. I guess when I just read Thompson, I had a senior moment. :)
Financial Jungle: I'll need to go back and look at MSFT again. months ago when I ran the analysis INTC was the strongest of the bunch, from an dividend income perspective.
Best Wishes,
D4L
D4L: Qualitatively, I believe microsoft (and intel as second to it) will be the tech companies that will have dividend growths. It will be difficult (if not impossible) to challenge their market leading positions. They have a excellent cash flow. However, these companies do not know what to do with it. Unless they create new markets, they will continue to have high cash flow, but moderate growth rates. Quantitatively: one needs to wait for fair value.
PI: I agree that both MSFT and INTC have the ability to become good dividend companies. When I ran the numbers on them INTC was closer to arriving, mainly because they have begun to raise dividends more aggressively than MSFT. I look forward to the day when i can add a mature tech company to my portfolio.
Thanks for stopping by and commenting!
Best Wishes,
D4L
D4L: Another tech company, ADI, may be a possible candidate. Does not have a long history for dividends, but have recently started growing dividends. Great brand in high performance analog, great balance sheet and zero debt, presently at fair value. And in most recent quarter, management said they plan to continue providing dividends.
Some food for thought !!
Dividend Tree: thanks for the suggestion. I'll add ADI to my list to look at. I have also been watching another tech div. company MCHP Microchip Technology Inc.
Best Wishes,
D4L