In September, Microsoft boosted its payment by a solid 18%, and National Semi hiked a whopping 33%! Those aren’t token increases … they demonstrate solid financial wherewithal and loyalty to shareholders.
But how are tech companies boosting their dividends right now? Aren’t they the kind of firms most hurt by economic downturns?
On one hand, the answer is, “yes” — tech companies do feel the bite of weaker economic conditions. Many of their products are discretionary items themselves. Take software, for example. You might delay upgrading to the latest version of Windows right away. Ditto for video game systems like Xbox 360.
It’s the same thing in the case of semiconductors. Many of these tiny circuits end up in discretionary items like cellphones and televisions.
So demand for tech products is clearly cyclical. Always has been. Even corporate customers, which make up a large percentage of tech buys, can — and will — wait to upgrade their systems when business is on the decline.
But despite the cyclicality, America’s best tech companies still have big brand names. Their sizable businesses are difficult to compete with. Cash flows remain strong.
Plus, these companies have shown rigid fiscal responsibility, especially after the tech bubble burst. They have clearly survived tough times before, and are well aware of the risk of not being prepared for future downturns. As a result, these companies boast strong balance sheets.
That’s translating into bigger dividend payments and a rare bright spot for income investors.
InvestingInDividends.com
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