In this article we will present the list of 10 best dividend paying technology stocks.
The recent gamer-induced stock market fiasco might really make you consider these 10 best technology stocks that pay dividends. Why? Well, during rocky stock market periods when capital gains are hard to achieve or nearly impossible you will still get paid. If you hold these stocks over a long period of time, they also provide a comfortable hedge against inflation and are tax-advantaged. Whether you focus on high-yield dividend stocks or plan on focusing on dividend growth, investing in such stocks is a popular choice because it’s a stable source of passive income. However, there is more to it than just the payout. Put yourself in the shoes of a financial decision-maker for a dividend paying company – knowing you have an already set cash commitment to investors leaves a lot less wiggle room for unnecessary spending. Cash that could have otherwise gone to pay for various bonuses, salaries and executive bonuses that would otherwise not reach shareholders is instead distributed amongst investors.
Gaining from dividends doesn’t always require you to outsmart the market or play any sort of advanced strategy to stay ahead of others. Some companies have paid dividends for well over a century now and while you can’t live to passively gain a massive amount of finances through simple holding, those stable payouts can keep you afloat in a market slump. If a company doesn’t cut its dividends during a slump, if you decide to look at the cost per share ratio, it could double or triple before the stock bounces back.
Another great advantage of giving dividend-paying stocks a try is that if you manage to find a good high-yield stock and invest right, you could reinvest those dividends and help accelerate your returns. If you manage to reinvest in the stock that paid them out in the first place, especially during a low point, you could help slow down its downwards momentum and score yourself some cheap shares. Not only does your portfolio benefit, but the company itself and other investors. And if you don’t want to reinvest in a particular stock, you could use dividends as a self-sustained way to diversify your portfolio.
These are all great reasons to invest in dividend stocks over the short term. Luckily, we believe we are in a very good spot to invest in dividend paying stocks to generate short term gains too. We are coming out of a deep pandemic induced recession. First, interest rates are near the lowest levels that they can be. Conservative bond investors are experiencing very low returns and they will be more likely to allocate more capital to dividend paying stocks in the coming months (there is really not a lot of alternatives for them to generate meaningful returns). Second, the Congress will pass another stimulus package and this time it will be nearly $2 trillion. That money will increase the sales and earnings of publicly traded companies. Some of that money will also flow into the stock market and push the stock prices higher. That’s why we think dividend paying stocks is a good investment theme for 2021.
What you do with your dividends is up to you but first let’s see how we picked the stocks in this list. We picked the 10 most popular dividend paying technology stocks among hedge funds. Our research has shown that hedge fund sentiment data is a very useful way to identify stocks with huge upside potential. We have been recommending a portfolio of 12-20 stocks (using hedge fund sentiment data in our selection process) in our premium monthly newsletter since March 2017. Our diversified portfolio of stock picks returned 158% vs. 70% gain for the S&P 500 ETFs. You can download a free sample issue here. Since hedge fund sentiment data was helpful in identifying market beating stocks, we decided to use this data to identify the 10 best technology stocks that pay dividends.
10. SS&C Technologies Holdings, Inc. (NASDAQ: SSNC)
Hedge Funds: 55
Total Hedge Fund Holdings: $2.31 billion
Dividend Yield: 0.88%
SS&C Technologies might be familiar to some of you due to the fact that they provide various types of financial technology solutions, mainly prepackaged software solutions. It has a strong grip on specific fintech niches like fund administration, wealth management accounting, and insurance funds. At the end of last year, SS&C appeared on 54 hedge fund portfolios, seeing a slight increase to 55 currently.
Here’s what Giverny Capital had to say about SSNC in and investor letter from Q1 last year:
…while SS&C is very profitable, many of the banks offering custodian and other back office services have exited over the years. There is a shrinking pool of competitors, high barriers to entry in the form of regulation and required technology investment, and a relatively low cost to the end customer. I can say confidently that investment firms find it difficult to switch fund administrators or client accounting software. The result is that SS&C has a sticky user base and some pricing power. Skeptics posit that SS&C will struggle as active management declines, but Stone responds that SS&C is not paid based on assets under management but based on trading and transactions. Every financial transaction must be recorded. There is no sign that transaction volumes across mutual funds, hedge funds, private equity, banks, healthcare and other financial institutions are in decline. SS&C has grown its adjusted earnings per share at a 20% rate for the past decade yet typically trades at a discount to the S&P 500 multiple.”
9. Texas Instruments Incorporated (NASDAQ: TXN)
Hedge Funds: 55
Total Hedge Fund Holdings: $2.08 billion
Dividend Yield: 2.37%
Texas Instruments, a well known provider of semiconductors and integrated circuits. The company has a hand in way more than just their fancy calculators. Their chips power a a huge variety of electronics from the speak-n-spell you had when you were little, through synthesizers and to advanced defense programs.
The company has been experiencing flat interest from hedge funs lately, without any change in its fund portfolio positions over Q3 and Q4 of last year. It can currently be seen on 55 hedge fund portfolios with long positions. The largest investor in TXN among the hedge funds we track is Ken Fisher’s Fisher Asset Management with 444.732 shares.
8. Oracle Corporation (NASDAQ: ORCL)
Hedge Funds: 56
Total Hedge Fund Holdings: $2.33billion
Dividend Yield: 1.56%
Oracle is a behemoth in the tech world, being pioneers and trailblazers of database technology. Through numerous acquisitions, Oracle has branched out into numerous enterprise-oriented technology niches. 56 funds in Insider Monkey’s database held stakes in the company entering the fourth quarter. Currently, Ken Fisher’s Fisher Asset Management holds the largest amount of shares from the hedge funds we track with 13,934,166 shares, valued just over $900 million.
Being a deeply rooted tech giant that is very much ancient in tech terms comes at a price. Here’s Ensemble Capital’s statement on why they dumped ORCL in the end of 2019 from an investor letter from the beginning of last year:
“We sold out of Oracle after losing conviction that the company can achieve the transition to their software-as-a-service business model with the speed and earnings power that we had expected. The transition had been taking longer than we initially forecasted and the company has stopped reporting on certain key measures that we believed were important indicators for us to track the progress. After much debate, we decided that the company no longer fully meets our requirements for inclusion in our portfolio due to the businesses future simply not being forecastable enough for us to have confidence in valuing the stock.”
Ultimately, the stock rose 1.4% after the company’s pitch in January 2020 which proved their prediction to be incorrect.
7. Broadcom Inc (NASDAQ: AVGO)
Hedge Funds: 59
Total Hedge Fund Holdings: $2.37billion
Dividend Yield: 3.09%
Broadcom is a USA based developer and manufacturer of a wide range of semiconductor and infrastructure software products. The company mainly caters to the data center, networking, software, broadband, wireless, and storage and industrial markets. A tech giant in its own right, Broadcom recently merged with Avago Technologies and retired its old ticker (BRCM) and adopted its current one.
Recently, AVGO announced a dividend raise after announcing their Q4 and fiscal year results. Tom Krause, CFO of Broadcom Inc. announced:
“Despite the challenges presented by the ongoing pandemic and macroeconomic uncertainties, we achieved record profitability, generating $11.6 billion of free cash flow in fiscal 2020. As a result, we are raising our target common stock dividend by 11 percent to $3.60 per share per quarter for fiscal year 2021.”
ZWEIG DIMENNA PARTNERS currently has the largest hedge fund holdings with 17,763 shares, valued around $7.78 million. Hedge fund sentiment towards the company has remained flat over 2020’s Q3 with 59 spots on hedge fund portfolios with long positions.
6. Cisco Systems, Inc. (NASDAQ: CSCO)
Hedge Funds: 59
Total Hedge Fund Holdings: $3.93 billion
Dividend Yield: 3.17%
Cisco is a world-wide developer of networking solutions in both software and hardware forms. Your connection to this site probably passes through a Cisco device even before exiting your home.
In its Q3 2020 Investor Letter, Heartland Advisors highlighted a few stocks and Cisco Systems Inc. (NASDAQ:CSCO) is one of them. Cisco Systems Inc. (NASDAQ:CSCO) is a technology company. Year-to-date, Cisco Systems Inc. (NASDAQ:CSCO) stock lost 6.4% and on December 21st it had a closing price of $44.88. Here is what Heartland Advisors said:
“A handful of Information Technology (IT) names have been grabbing most of the investment headlines lately, however, as a whole, the sector has been a mixed bag from a performance standpoint. The Russel 3000® Value Index highlights the dynamic where the group ended the period mostly flat. Our holdings in the space outperformed marginally but also contained a key detractor, Cisco Systems, Inc. (CSCO).
Cisco, the world’s leading computer networking provider, was down for the period after revenues from its Products and Applications business lines weakened as IT departments postponed network spending in response to COVID-19. Sales from its security line were up roughly 14% but strength in the segment wasn’t large enough to offset weakness elsewhere. Impressively, they held operating margin on a 9% revenue decline.
Wall Street’s reaction to the weak results were mixed. Some credited the company for executing well in the face of an unprecedented macro pressure on its clients, while others cited results as an indicator that Cisco is struggling in its transformation from a predominantly hardware-oriented business to one that generates recurring-revenue through software and services.
The challenges faced by Cisco strike us as a temporary setback to what has been ongoing progress in its transition to a model that generates recurring revenue and is less tied to the IT spending cycle.
We believe the positive strides made in previous quarters will resume. With the recent setback, shares are trading at an attractive 12x earnings, while generating a nearly 4% dividend yield and a free cash flow/enterprise yield of nearly 10%.”
Ken Fisher’s Fisher Asset Management currently owns the largest portion of stock among the hedge funds we track with 20,980,164 shares valued over $938 million. Hedge fund sentiment towards the company remains pretty flat since Q3 of 2020 with it still holding 59 hedge fund portfolio positions.
5. Expedia Group Inc (NASDAQ: EXPE)
Hedge Funds: 64
Total Hedge Fund Holdings: $3.78 billion
Dividend Yield: 1.07%
Expedia is a world-wide travel fare aggregator with popular brands such as Trivago on its roster. If you’re thinking that the COVID-19 pandemic hasn’t been kind towards any travel oriented company, you’re right but Expedia is expected to bounce back quicker than other travel companies.
D.A Davidson’s Tom White recently advised that investors buy EXPE stock. Here’s why he thinks this stock can turn a profit:
“We’re generally positive on both Booking (NASDAQ: BKNG) and Expedia (NASDAQ: EXPE). We’ve got a neutral rating but they are both great companies.”
Daniel Loeb’s Third Point capitalized on the stock’s low point. Third Point bought over 1.62 million shares of EXPE during Q3 of 2020, hoping to turn a profit on the travel platform’s depressed stock price. Recent vaccine development and vaccination effort has sent EXPE and similar stocks soaring by a significant percentage.
4. Intel Corporation (NASDAQ: INTC)
Hedge Funds: 66
Total Hedge Fund Holdings: $4.34 billion
Dividend Yield: 2.45%
If you look around the device you’re reading this on, you might find an Intel label. The company has its components and software running a huge portion of the PC and data center market. Even so, Intel has been having a rocky year which ended with a letter from Third Point, a fund that reportedly holds around $1 billion in stakes in Intel. The letter addressed issues in Intel’s loss of positions in the aforementioned markets to its competition. The fund also demands that Intel should hire a financial advisor who will help it strip bad investments, of which apparently there have been plenty in recent years.
At Q3’s end, a total of 66 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -15% from the second quarter of 2020. Still, Third Point’s recommendations were immediately followed by a bump upwards in the company’s stock.
3. QUALCOMM, Inc. (NASDAQ: QCOM)
Hedge Funds: 87
Total Hedge Fund Holdings: $2.58 billion
Dividend Yield: 1.61%
According to the smart money, Qualcomm has a great potential for growth in the following years. here’s what Amana Mutual Funds says about Qualcomm Inc in an investment letter from Q2 2019:
“We believe the new decade will be a strong one for semiconductor stocks, and as the world’s leading foundry, Taiwan Semiconductor will certainly benefit. Qualcomm faced a raft of challenges over the past few years but commands an unassailable lead in 5G intellectual property.”
Comments made by Del Principe O’Brien Financial Advisors about Qualcomm Inc (NASDAQ:QCOM) stock in their Q2 2019 investor letter reinforce that:
“When Qualcomm was trading in the low $50s, we bought every share we could. Qualcomm stock rose to around $70 when Broadcom was set to acquire the company, but ultimately the deal did not go through. In April of this year, Qualcomm ended a lengthy and complicated legal battle with Apple over the licensing of Qualcomm’s chip technology in Apple’s mobile devices, including its iPhones. The settlement included a payout from Apple to Qualcomm rumored to be around $6 billion, as well as a six-year licensing agreement and a supply agreement guaranteeing that the chipmaker continue to provide its products to the largest company in the world. With this settlement and the expected increase in product shipments, Qualcomm anticipates an incremental earnings per share of $2. As Qualcomm shareholders, we were able to realize a gain of 54% over a short period of time.”
At the end of the third quarter of 2020, a total of 87 of the hedge funds tracked by Insider Monkey were long this stock, a change of 18% from one quarter earlier. By comparison, 60 hedge funds held shares or bullish call options in QCOM at the same time in 2019.
2. Apple Inc (NASDAQ: AAPL)
Hedge Funds: 134
Total Hedge Fund Holdings: $127.3 billion
Dividend Yield: 0.61%
With their constant innovation output, Apple might seem like a company with endless momentum. And indeed, on the financial side of things, the company hasn’t lost its edge. In the Q3 2020 Investor Letter, Alger Spectra Fund Fund highlighted a few stocks and Apple Inc. (NASDAQ:AAPL) was one of them. Here’s what they had to say:
“Apple is a leading technology provider in telecommunications, computing and services. Apple’s iOS operating system is the company’s unique intellectual property and competitive strength. This software drives extremely tight engagement with consumers and enterprises. This tight engagement is facilitating significant growth in high-margin services like streaming music. apps. and Apple Pay. Apple’s continued development of high-margin services and earnings streams for wearable devices as well as the potential contribution of 5G phones to the company’s growth supported the performance of Apple shares.”
The company has been enjoying an increase in hedge fund interest, seeing 134 funds holding $127.30 billion worth of stock, up from 128 funds with stakes worth $106 billion a quarter earlier.
1. Microsoft Corporation (NASDAQ: MSFT)
Hedge Funds: 234
Total Hedge Fund Holdings: $42.1 billion
Dividend Yield: 0.93 %
In a Q4 2020 Investor Letter, Wedgewood Partners highlighted a few stocks and Microsoft was also mentioned in the letter. Here’s what they had to say:
“Microsoft continued to generate solid double-digit top-line, and operating earnings growth. The Company’s all-encompassing portfolio of “hybrid” cloud solutions is compelling for customers as IT organizations vacillate between on-premises and off-premises (and then likely on-premises again). For example, Microsoft 365 has added an array of features to make remote work easier, yet, as customer applications grow in compute intensity, those customers’ on-premises and edge computing topologies retain or grow in importance. Microsoft’s strategic pivot to be more customer-friendly and collaborative will sustain its growth and returns for several more years so we are happy with our position.”
Please also see 10 Best Dividend Paying Stocks Under $50 and Top 15 Dividend Stocks With Upside Potential
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Disclosure: No positions. 10 Best Technology Stocks That Pay Dividends is originally published at Insider Monkey.
