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Tech Companies Pay Dividends Too

Saturday - 4/27/2013, 5:07pm  ET

The technology sector is typically considered an area of high growth. It’s for that reason that we sometimes have great difficulty finding dividend-payers in the sector. I’ve done some searching though, and I’ve found three companies from three distinct technological realms to help diversify that dividend portfolio.

Application software

You had to know that Microsoft would make an appearance in this article, right? Well, here it is, in the application software segment.

Microsoft pays a very nice dividend that yields right around the 3% mark. Combine that 3% with the security you get from holding one of the world’s largest software companies, and you may have yourself a great investment to sit on.

“May?” Yes, and quite rightly so. Microsoft has been sitting in equilibrium for some time now. The stock doesn’t really go anywhere. If you're already an investor, and you’ve been one for five years, then you’ll probably be aware that the stock has returned a paltry 3% during that time. Oh, and that’s not per year! That’s actually the grand total return on Microsoft, sans dividends, over the last five years.

Despite sitting stagnant, Microsoft has actually increased sales quite dramatically since 2008, going from $60 billion up to the $73 billion that we saw at the close of 2012. Net income is down over the same period from a 2008 amount of $17.68 billion to $16.98 billion in 2012. The peak sales during that period came in fiscal year 2011, when Microsoft put up $23.15 billion in net income.

With the company effectively being stagnant, I would only recommend a buy to those of you who want the security of such a big firm with a moderately high dividend yield. For everyone else, I’d have to say hold if you own, avoid if you don’t. There are plenty of other tech stocks to make money from if you’re not already in this one.

Internet software and services

J2 Global is an internet-based communications company with six products flying under their banner. The products allow users to send faxes through the web, perform email marketing, and back up data. These services combined give the company a $1.77 billion market cap.

J2 Global is seeing moderate sales growth year-after-year, and net income is also on the rise. Sales have grown from $241 million in 2008 to a 2012 value of $371 million. Net income has risen from $72.5 million in 2008 to the $121.5 billion that was posted at the close of 2012.

With promising sales and net income growth, this is looking like a good company to hop aboard with. The dividend that it pays is 2.41%. That’s not too shabby, and could easily bolster your dividend portfolio.

Communications equipment

Qualcomm could actually fall under any number of categories. When it really comes down to it though, this company is a communications company that is tasked with bringing faster chips to cellphones, and ensuring that you can get connected to your 4G network.

First off, it should definitely be pointed out that this company has a market cap that sits around $110 billion. There goes the growth, right? Whoa! Not so fast there! The analysts covering this stock actually believe that growth will continue to be above 10% over these next two years.

While you sit back and collect on those yearly gains, you’ll also be able to collect the 2.19% that Qualcomm pays out in a dividend yield.

In 2008, Qualcomm had $11.1 billion in sales. They have managed to come close to doubling that over the last five years. 2012 sales came out to a nice $19.1 billion. Net income from those sales came out to $5.33 billion.

One big bonus about Qualcomm versus the other two tech stocks in the article is that they are the only ones not carrying some long term debt. I’m sure there are some people out there that will take an interest in this stock simply because of that.

Investor takeaway

There you have it, three tech stocks that pay out dividends.

If there was one that was absolutely a ‘buy’ then that would have to be Qualcomm, for me. The company has no debt, has promising growth prospects, and it pays a nice little 2% yield.

Both J2 Global and Microsoft fall under the ‘moderate buy’ category, in my mind. There are some people that these types of stocks will appeal to, and I wouldn’t knock you if you ended up buying either one of them.

This article was originally published as Tech Companies Pay Dividends Tooon Fool.com

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