{"id":73976,"date":"2023-10-18T09:28:14","date_gmt":"2023-10-18T13:28:14","guid":{"rendered":"https:\/\/ifintechworld.com\/investing\/2-big-tech-dividends-that-are-soaring-not-because-of-ai\/"},"modified":"2023-10-18T09:28:17","modified_gmt":"2023-10-18T13:28:17","slug":"2-big-tech-dividends-that-are-soaring-not-because-of-ai","status":"publish","type":"post","link":"https:\/\/ifintechworld.com\/?p=73976","title":{"rendered":"2 Big Tech Dividends That Are Soaring (Not Because Of AI)"},"content":{"rendered":"
\n

Our favorite tech-sector dividend growers are finally<\/em> on sale\u2014and our time to \u201clock in\u201d these fast-growing payouts has arrived.<\/p>\n

Our Tech Buying Opportunity: Fully Booted Up<\/h2>\n

These days, fear surrounds us, and we contrarian income seekers know<\/em> that times of fear are when we go shopping. That goes double for tech stocks, which tumble when the 10-year rises (and vice versa).<\/p>\n

Take last year, when the rate on the \u201clong bond\u201d spiked and high-flying techs, shown in purple below by the performance of the benchmark Technology Select Sector SPDR ETF (XLK
\n
\n XLK
\n <\/fbs-ticker>)<\/strong> hit the deck:<\/p>\n

<\/fbs-ad><\/p>\n

Sure, the AI hype has fueled a nice rebound this year, but this latest spike in the 10-year has given us a nice\u2014and rare\u2014second chance to buy in, washing out many of our faves.<\/p>\n

Over the last few weeks, I\u2019ve been saying the 10-year would bump its head on the \u201c4.3% ceiling\u201d and retreat. The fact that it\u2019s blown through<\/em> that ceiling only means its fall will be that much harder\u2014and our favorite tech-sector dividend payers will rip that much higher in response!<\/p>\n

We\u2019ve already started to see that happen, but it\u2019s not too late to lock in historically high payouts (and rapid payout growth) from our favorite big-name techs.<\/p>\n

Here\u2019s something else most folks forget when it comes to Big Tech: it\u2019s sitting on a pile of cash rivaling that of just about any sector except banks. The poster child here, of course, is Apple
\n
\n AAPL
\n <\/fbs-ticker> (AAPL),<\/strong> with its $167-billion hoard. As that cash gets put to work in buybacks, dividends, R&D or, as we\u2019ll see in the two stocks below, acquisitions, we stand to benefit.<\/p>\n

Big Tech Dividend No.1: Cisco Systems (CSCO)<\/h2>\n

Cisco\u2019s networking gear puts it square in the tracks of AI\u2019s rapid growth. But that\u2019s just the headline. Look deeper and you\u2019ll see something equally important: Its ongoing move into software\u2014which, in turn, is driving its shift to a subscription-based model.<\/p>\n

That shift will further stabilize Cisco\u2019s revenue, and it\u2019s taking hold nicely, with recurring revenue rising 5% in its 2023 fiscal year, to make up 43% of the total.<\/p>\n

The company\u2019s acquisition of Splunk
\n
\n SPLK
\n <\/fbs-ticker> (SPLK), <\/strong>announced in September, is yet another move in this direction, bringing in Splunk\u2019s subscription-based cybersecurity software and putting Cisco in an even better position to leverage AI.<\/p>\n

Cisco can easily afford Splunk, with $26 billion in cash and just $8 billion in long-term debt, a sliver of the company\u2019s $219-billion market cap. Even so, it trades at just 13.3-times forward earnings. The deal won\u2019t jeopardize Cisco\u2019s payout growth, as it\u2019s expected to add to cash flow in the first year. Plus, the dividend\u2014current yield: 2.9%\u2014already makes for a light load, at just 33% of Cisco\u2019s last 12 months of free cash flow (FCF).<\/p>\n

And while this payout isn\u2019t growing as fast as it once did, it is a reliable \u201cmagnet\u201d on the share price.<\/p>\n

And we\u2019ll give management a bit of a pass on payout growth because they\u2019re buying back shares at a solid pace, as shown in the blue line above. And check out the drop in shares outstanding as everything\u2014particularly tech\u2014went into the dumpster in \u201922. That\u2019s a sign management knows when its stock is oversold\u2014and when to accelerate its buybacks. That\u2019s the kind of savvy we want.<\/p>\n

Big Tech Dividend No. 2: Broadcom
\n
\n AVGO
\n <\/fbs-ticker> (AVGO)<\/strong><\/p>\n

Semiconductor maker Broadcom ticks many of the same boxes as Cisco, starting with gains as AI drives demand for computing power. But there is one key difference: much<\/em> faster dividend growth<\/em>.<\/p>\n

Let\u2019s rattle through the similarities between these two tech-dividend giants:<\/p>\n

    \n
  1. No rate worries,<\/strong> thanks to a \u201cfortress\u201d balance sheet: Broadcom\u2019s sitting on $12 billion<\/em> in cash, and while it does carry $39 billion in debt, that\u2019s just over 10% of its (massive) value as a public company: $373 billion. Peanuts.<\/li>\n
  2. A big acquisition: <\/strong>That strong balance sheet leaves Broadcom plenty of room to close its looming $75-billion cash-and-stock purchase of VMware
    \n
    \n VMW
    \n <\/fbs-ticker> (VMW)<\/strong>. The move will boost Broadcom\u2019s presence in AI and cloud computing. Plus, VMW is profitable, with EPS jumping 34% in the latest quarter and revenue up 2.2%<\/li>\n
  3. A safe dividend, <\/strong>at 43% of FCF, this one\u2019s also easy to carry, especially when you consider revenue was up 5% in the last quarter, while EPS jumped 8%.<\/li>\n
  4. A potent Dividend Magnet:<\/strong> No question! As I\u2019ve said before, share prices always<\/em> catch up to dividend growth\u2014something Broadcom\u2019s stock resisted for most of the past decade\u2014till its 1,700% (!) payout growth in that time recently broke the stalemate.<\/li>\n<\/ol>\n

    To be sure, that stunning payout and share-price growth have left Broadcom pricier than Cisco, at 21-times forward earnings. So it may not rip quite as high when rates do pull back. But that quadruple-digit dividend growth will build on the 2% yield you\u2019d get on a buy made today in short order. And with Broadcom set to announce its next hike in December, we won\u2019t have to wait long to get started.<\/p>\n

    Brett Owens is chief investment strategist for <\/em>Contrarian Outlook<\/em>. For more great income ideas, get your free copy his latest special report: <\/em>Your Early Retirement Portfolio: Huge Dividends\u2014Every Month\u2014Forever.<\/p>\n

    Disclosure: none<\/em><\/p>\n<\/div>\n

    Read the full article here<\/a><\/p>\n","protected":false},"excerpt":{"rendered":"

    Our favorite tech-sector dividend growers are finally on sale\u2014and our time to \u201clock in\u201d these fast-growing payouts has arrived. Our Tech Buying Opportunity: Fully Booted Up These days, fear surrounds us, and we contrarian income seekers know that times of fear are when we go shopping. That goes double for tech stocks, which tumble when […]<\/p>\n","protected":false},"author":1,"featured_media":73977,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[239],"tags":[83],"class_list":["post-73976","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-investing","tag-featured"],"yoast_head":"\n2 Big Tech Dividends That Are Soaring (Not Because Of AI) | iFintechWorld<\/title>\n<meta name=\"description\" content=\"Our favorite tech-sector dividend growers are finally on sale\u2014and our time to \u201clock in\u201d these fast-growing payouts has arrived. 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