If you are looking for technology stocks to quench your thirst for stable and possibly increasing streams of dividend income, you’ve arrived at the right article. Tech stocks are innately aggressive and volatile, hence, the dividends they pay act as an important buffer. I have compiled some technology stocks that are currently hot that have remarkably grown their dividend payments in recent years. These are International Business Machines Corp. (NYSE:IBM), Cisco Systems, Inc. (NASDAQ:CSCO), Motorola Solutions Inc (NYSE:MSI), Equifax Inc. (NYSE:EFX), and Oracle Corporation (NASDAQ:ORCL). Most of these have managed to grow their dividend payments at double-digit rates, have positive earnings surprises, positive revenue growth, and double-digit profit margins. Read on to see for yourself.
Sources: nasdaq.com and finviz.com; Data retrieved March 8, 2013
International Business Machines
IBM has grown its dividend payments at an average annual rate of 14.81% within the last 3 years. Even if IBM won’t be able to continue this high rate of growth in the future, the current payout, at $3.30 per share in 2012, is enough to attract dividend-seeking investors. Its payout ratio based on cash flow is at a sustainable level of 19%. IBM has a very low P/E ratio at 14.46 with a forward ratio of 11.29. Despite a lack of growth in revenue during the recent quarter, its profit margin has been improving. From 18.62% in December 2011, the rate has gone to around 20% in December 2012, which is why it has surpassed earnings expectations in the latest quarter. IBM’s main growth source is its software business, as it was the case for over 10 years now. IBM reported that its main growth drivers in 2013 would still be from those new systems it had established in 2012. These are the outcomes of a string of acquisitions it has successfully nailed in 2012 where the company spent $3.7 billion. Among these acquisitions are Varicent Software, Worklight, Vivisimo, Kenexa, and Tealeaf Technologies. Analysts estimate IBM’s EPS to grow at about 10% every year in the next 5 years.
Cisco Systems, Inc. (NASDAQ:CSCO) is quite new in paying dividends but its performance has been impressive so far. And judging by its growth prospects and current trend, the company is an emerging top dividend generator. It has almost tripled its payment from a mere 6 cents in the first quarter of 2011 to 14 cents in 2012’s last quarter. Cisco’s low P/E ratio of 12.48 shows a relatively attractive stock price despite the record highs that it is enjoying.
Cisco has a decent growth estimate of 8.4% annually for the next 5 years. Furthermore, it has witnessed an outstanding improvement in its profit margin from 18.93% at the end of Jan. 2012 to 25.98% in the same period this year. Although the growth may be quite tame at less than 5%, these fundamentals should be enough to lure investors to its side. It has beaten earnings estimates at least in the past 4 consecutive quarters. Furthermore, Cisco Systems, Inc. (NASDAQ:CSCO) sits on a huge amount of free cash flow, $2.32 billion in quarter ending Jan. 31. While the market seems to be less optimistic about Cisco at present, as shown by its low P/E ratio, now is the best time to make the first move before everybody else finally gets the idea.
Motorola Solutions Inc (NYSE:MSI) started paying dividends in the third quarter of 2011 and since then, it has increased the amount once from 22 to 26 cents per share. The P/E ratio is at 21.04, with a forward ratio of 14.67. The stock price has been rallying robustly since August last year. Quarterly revenue has been growing year-on-year stably in 2012 at roughly 6% while its profit margin has recently performed an encouraging improvement from 8% in December 2011 to 13.76% in December 2012. Hence, the company had been consistently surpassing earnings estimates at least during the last 4 consecutive quarters. Motorola Solutions Inc (NYSE:MSI)’s encouraging growth performance is largely attributed to the growth of its core operations shown by a net operating cash flow of $1.07 billion in 2012, the highest in recent years. Given this, a positive free cash flow, and a double-digit expected growth in the next 5 years, dividend-income seekers can be assured of the company’s ability to raise dividends in the future.
Equifax has increased its dividend payment at an average annual rate of 72% during the last 3 years. The company has had a rally in 2012 where its quarterly revenue grew by an average of 10%, year-on-year. Its profit margin had also remained in the double-digits except that for the latest quarter when it went down to 8.30%. Nevertheless, the company had exceeded earnings estimates in all the quarters of 2012. The company’s core business activities are contributing to its sound cash flow statement. The net operating cash flow of $496.3 million and free cash flow of $344.3 million in 2012 were the highest in recent years. With the latest payout ratio based on cash flow of a mere 17.3% and a growth estimate of about 12% in the years ahead, dividend lovers can count on a safe dividend income from Equifax.
Oracle Corporation (NASDAQ:ORCL) has grown its dividend payment by a huge annual average rate of 43.65% from 2010 to 2012. Its P/E ratio of 16.92 shows an attractive stock price. It has had consistent positive earnings surprises in all the quarters of 2012. The recent positive growth on its quarterly earnings and an impressively improving profitability as shown by its net margin approaching 30% are luring investors’ attention resulting in a remarkable rally on the stock price. In 2012, Oracle Corporation (NASDAQ:ORCL) saw its net operating cash flow grew by 22% at $13.74 billion from $11.21 billion in 2011. I wonder what it will do to its $11.89 billion free cash flow, but I’m sure Oracle will continue to offer attractive payouts in the future. After all earnings are expected to rally at a rate of about 12% in the next 5 years. Investors are already on the move because the stock price is rallying pretty fast.
If you are looking for technology stocks that can offer exciting growth with the stabilizing effect of high-growth dividend payouts, you just saw the best candidates. Positive earnings surprises, increasing revenues, double-digit margins, and attractive levels of cash combine with impressive dividend growth to offer outsized returns.
The article Grab These Dividend-Paying Top Technology Stocks Now! originally appeared on Fool.com and is written by Aubrey Tabuga.
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