5 Tech Stocks with 5% Dividend Potential
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In a startling reversal, the high tech sector is now among the dividend paying stock groups with the most generous yields. Always flush with cash, companies such as Microsoft (NASDAQ: MSFT) and Apple (NASDAQ: AAPL) and their high tech brethren had previously thought that capital was better deployed in mergers and acquisitions or in research and development rather than providing shareholders with dividend income. Many of these high tech behemoths now pay dividend yields much higher than the average of around 2% for a member of the Standard & Poor's Index.
Utilizing a sniper ambush tactic of sighting a designated point and than pulling the trigger when the target enters into the crosshairs, investors can pick up these stocks with around a 5% dividend yield based on past performance of the shares. As an example, Intel Corporation (NASDAQ: INTC), the semiconductor giant, now pays a dividend of 3.42%. With the stock price around $26.33, Intel Corporation would have to fall around one-third for the dividend yield to be about 5%, or 250% higher than the S&P 500 average. As the 52-week price range for Intel Corporation is $18.54 to $29.01, that could have happened.
It is the same situation with Taiwan Semiconductor (NYSE: TSM), which now has a dividend yield of 3.45%. Currently, Taiwan Semiconductor trades for around $14.40 a share. The past year of market action has seen Taiwan Semiconductor fluctuate from a low of $10.38 to a high of $15.59. At its low, buying would have resulted in a not only a stock that is up 15.57% for 2012, but also one with a yield close to 5%.
Intersil Corporation (NASDAQ: ISIL) now pays a dividend of 5.11%. The stock was recently downgraded by Needham on July 26 after being upgraded by the same firm on May 29th of this year, but is up for the last week of market action; and starting to recover. At $9.40, Intersil Corporation is very close to its 52-week low. Earnings-per-share growth is up by 151.66% this year. Over the next 52 weeks, earnings-per-share growth is projected to be 633.30%.
The dividend framework of both Microsoft and Apple combined with the fluctuain tions of the stock price could easily result in 5% yields for investors. Apple, with the share price rising aniticipation of the iPhone 5 being introduced on September 12, is around its year high now. The dividend yield is 1.64% with Apple's low for the last 52 weeks of market action being $354.24.
At $30.90, Microsoft is close to its year high with a dividend yield of 2.59%. The low for Microsoft over the past 52 weeks is $23.16. In March 2009, Microsoft was trading in a range that would resulted in a 5% dividend for those who bought at that time. The same holds true for Apple as its price has fluctuated in wide swings in the past, too, which will allow for enhancing the dividend income return on the dips in the future.
Each of these companies has the capital structure and income statement to not only sustain the dividend, but allow for dividend growth well into the future. All are profitable with little debt and loaded with cash. Apple has about $117 billion of the long green which will increase greatly due to its profit margin of 26.97%. While the historic dividend payout ratio is around 50% for a Standard & Poor's 500 company, it is only 34.12% for Intel Corporation and 39.58% for Microsoft. That leaves ample cash flow for increasing the dividend in the years ahead.
Intel Corporation provides an example of the proof for this. For the last quarter dividend date of August 3, 2012, Intel Corporation paid a cash dividend of $0.225, or 84 cents a year. For the quarter dividend date of August 5, 2002, Intel Corporation paid a cash dividend of only $0.02, just 8 cents a year. That is an increase of more than 1,000% over the last decade.
This rewards long term investors with patience (as does most investing). The share prices of the high tech sector fluctuate, along with others. The beta for Intel Corporation is 1.01, slightly above average. For Intersil Corporation it is 1.39, almost 40% higher than the market as a whole. Buying for the long term with dividend income factored in as a major component will yield to investors a very attractive total return for these high tech companies.
Fool blogger Jonathan Yates does not own any of the stocks mentioned in this article. The Motley Fool owns shares of Apple, Intel, and Microsoft. Motley Fool newsletter services recommend Apple and Intel. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.If you have questions about this post or the Fool’s blog network, click here for information.