Today we will look at good yield opportunities within the technology sector. High yield from the sector is a relatively new development, but the sector has been one of biggest dividend payout raisers over the past five years. In fact, the sector now accounts for over 14% of all dividends within the S&P vs. under 6% in 2007.
Over the next couple of weeks all eyes will be on Apple (AAPL). The tech juggernaut is widely expected to raise its dividend significantly before its earnings report on April 23. A Bloomberg poll of analysts showed an increase of 56% in Apple's dividend as the consensus. I think a substantial dividend hike is in the bag, as otherwise the company could end 2013 with almost $170 billion in cash on hand if it does nothing. The company first started to pay a dividend last year, and the projected dividend hike will take Apple's yield to over 3.5%. This is above the yield of traditional dividend payer Procter & Gamble (PG) and on par with utility NextEra Energy (NEE). In addition, Apple's shares are selling at lower valuations than either of these traditional dividend payers in addition to having much better growth prospects.
Apple's decision will have ripple effects throughout the tech sector, especially for mature tech companies with substantial cash on their balance sheets. These include Cisco Systems (CSCO) and Microsoft (MSFT). CSCO has over $45 billion in cash and marketable securities on the books.