Income investors can benefit from smaller tech firms.
For many investors, technology stocks can be the most interesting part of their holdings. These companies are creating new products, growing fast and trying to tap into trends that are transforming an old way of doing business -- and in some cases, the global economy. But tech stocks come with risk. For every big success story like e-commerce giant Amazon.com (ticker: AMZN) there are countless others that failed to get off the ground as a start-up. However, not all tech stocks are these high-risk, high-reward offerings. There are smaller tech companies that offer reliable revenue and have a decent history of dividend payments. Here are seven that income investors should consider.
Cogent Communications Holdings (CCOI)
Washington, D.C.-based Cogent provides high-speed internet access, data center services and other specialized communications offerings to small businesses. Anyone who has worked for a small company or run their own business understands how hard it is to juggle the ins and outs of information technology with a small staff -- and so does Cogent, picking up the slack so customers can focus on their core operations. Thanks to longer-term enterprise service contracts, Cogent generates steady revenue and dividends from its clients. Given the importance of digital connections in the 21st century economy, it's no wonder CCOI has such reliable cash flow.
Current yield: 3.9%
Xperi Corp. (XPER)
Xperi has developed and licenses very specific hardware used in the chips for smartphones, laptops and data servers. While the company doesn't manufacture anything, it is a leader in the intellectual property for many of the key technologies in the devices in widespread use, as well as the manufacturing processes to bring this gear to market. It's not a thrilling business, but with each item that deploys Xperi's patented technology there is a royalty paid by the end user of that tech. This means a steady flow of cash into a fairly lean company, a portion of which is then shared through dividends.
Current yield: 3.8%
Micro Focus International (MFGP)
IT infrastructure play Micro Focus offers software solutions that include backing up documents, cybersecurity protection and other support relied on by businesses. This $9 billion company may not be a household name, but with more than 40 years of experience and about 15,000 employees, it is certainly one of the older tech stocks. MFGP has only recently begun paying dividends, however, starting in 2018. But those distributions have been pretty generous so far and bode well for future income potential.
Current yield: 5.2%
An integrated telecom company, Veon is a wireless and landline data provider in eastern Europe and the Far East as well as a vendor of network hardware and internet services to small businesses. It is diversified across business lines and as geographies, and the company boasts 210 million customers from Russia to Pakistan to Ukraine. This is a great mix of emerging market growth potential in technology as well as the consistent paydays that come from a traditional telecom company. At $5 billion, Veon also is the right size to weather any short-term trouble but still have plenty of growth ahead.
Current yield: 10.2%
United Microelectronics Corp. (UMC)
UMC is a Taiwan-based semiconductor foundry, making chips for all manner of electronics. It's certainly not the biggest shop in the world, and unlike big-time chipmakers like Intel Corp. (INTC), it doesn't develop its own branded hardware. But while margins are a bit thinner this way, the business is incredibly reliable as UMC keeps pumping out chips for clients worldwide. UMC passes a share of its revenue in a regular dividend that is more than double the typical stock on Wall Street and much higher than others in the tech sector.
Current yield: 5.2%
ASE Technology Holding Co. (ASX)
ASE Technology provides the "packaging" of chips in their final form. This includes coating the nearly finished chips to help withstand corrosion or physical damage, placing them into the circuit where they belong and then testing the hardware to make sure it performs as planned. Once again, there's much more money in the companies with their names branded on high-end TVs or smartphones. However, the services ASX provides are integral to any 21st century device -- including not just gadgets but everyday appliances that use some form of chipset. This adds up to a reliable revenue stream and consistent dividends for ASX shareholders.
Current yield: 3.4%
Iron Mountain (IRM)
Iron Mountain started as a document storage provider in the days of filing cabinets and stenographers. Tax forms and other financial records could take up a lot of space, so Iron Mountain stepped in to help. In a digital age IRM has been rapidly evolving -- including becoming a cloud-based storage provider. The company also offers related technology such as data center services and cybersecurity, plus its traditional suite of document storage and secure shredding when items are past the date they're needed. This gives IRM an interesting position in both the old and new world of documents, and long-term contracts help provide a steady stream of income.
Current yield: 7.6%
Small tech stocks to buy for income:
-- Cogent Communications Holdings (CCOI)
-- Xperi Corp. (XPER)
-- Micro Focus International (MFGP)
-- Veon (VEON)
-- United Microelectronics Corp. (UMC)
-- ASE Technology Holding Co. (ASX)
-- Iron Mountain (IRM)
More From US News & World Report