After 17 years without a dividend, Apple (Nasdaq: AAPL) finally announced on March 19 a plan to pay $2.65 per share each quarter, beginning the period starting July 1. On top of the dividend, they are also implementing a share buyback plan for $10 billion of stock, according to Adam Satariano of Bloomberg.
The dividend plan will cost the company $45 billion over the next three years, and CEO Tim Cook said that it will likely broaden the company's shareholding basis to fund managers that only invest in dividend-paying companies. Wedgewood Partners CIO David Rolfe said, "It was high time to do this," since Apple has been holding $96.7 billion in cash largely from the iPhone and iPad sales.
After the announcement, Google is now the only tech company with a market cap over $100 billion that doesn't offer a dividend, in contrast to names like Cisco, Intel, and Microsoft. With so much success, Apple had "literally become a cash machine," in the words of Needham & Co. analyst Charlie Wolf. Steve Jobs had resisted efforts to get Apple to return cash to their investors, according to Piper Jaffray Cos. analyst Gene Munster. He said, "It would have been unheard of under Jobs' watch. This is just finance 101, but it looks like rocket science next to what they've done in the past."
Business section: Investing ideas
We decided to put together a list of tech companies that are paying dividend yields over 1%, and with a positive payout ratio under 50%. Then we checked their institutional transactions for net purchases to see what the "smart money" was doing with them. Do you think these stocks provide opportunity for both growth and income?
List sorted by market cap. (Click here to access free, interactive tools to analyze these ideas.)
1. ASML Holding: Engages in designing, manufacturing, marketing, and servicing semiconductor processing equipment used in the fabrication of integrated circuits. Market cap at $20.30B.Dividend yield at 1.23%, payout ratio at 11.77%. Net institutional purchases in the current quarter at 17.8M shares, which represents about 4.3% of the company's float of 413.53M shares
2. Activision Blizzard (Nasdaq: ATVI): Publishes online, personal computer (PC), console, handheld, and mobile games of interactive entertainment worldwide. Market cap at $14.06B.Dividend yield at 1.44%, payout ratio at 18.15%. Net institutional purchases in the current quarter at 29.2M shares, which represents about 6.77% of the company's float of 431.06M shares
3. TIM Participacoes (NYSE: TSU): Provides mobile telecommunications services through global system mobile (GSM) technology to business and individual customers in Brazil. Market cap at $7.79B.Dividend yield at 3.99%, payout ratio at 23.75%. Net institutional purchases in the current quarter at 9.0M shares, which represents about 7.85% of the company's float of 114.60M shares
4. FactSet Research Systems: Provides financial and economic information to investment community worldwide. Market cap at $4.45B.Dividend yield at 1.09%, payout ratio at 27.71%. Net institutional purchases in the current quarter at 1.8M shares, which represents about 4.33% of the company's float of 41.53M shares
5. j2 Global Communications (Nasdaq: JCOM): Provides outsourced, value-added communication, messaging, and data backup services to businesses of all sizes, from individuals to enterprises worldwide. Market cap at $1.47B.Dividend yield at 2.75%, payout ratio at 16.97%. Net institutional purchases in the current quarter at 3.9M shares, which represents about 8.58% of the company's float of 45.47M shares
6. Xyratex (Nasdaq: XRTX): Provides modular enterprise-class data storage solutions and storage process technology. Market cap at $449.94M.Dividend yield at 1.59%, payout ratio at 10.53%. Net institutional purchases in the current quarter at 1.8M shares, which represents about 6.73% of the company's float of 26.76M shares
7. Keynote Systems: Provides Internet and mobile cloud monitoring solutions worldwide. Market cap at $341.15M.Dividend yield at 1.22%, payout ratio at 7.86%. Net institutional purchases in the current quarter at 1.1M shares, which represents about 8.12% of the company's float of 13.54M shares.
Interactive Chart: Press Play to compare changes in analyst ratings over the last two years for the stocks mentioned above. Analyst ratings sourced from Zacks Investment Research.
Kapitall's Danny Guttridge does not own any of the shares mentioned above. Institutional data sourced from Fidelity.
