Dividend Growth Tech Stocks

[TomK]

I almost posted this in Ronn’s “Thoughts on tech” thread, but then figured that would be a hijack, since that thread is really about CSCO vs ORCL vs QCOM. It made me want to start a more general conversation about tech stocks in a dividend growth portfolio.

I've always been pretty wary of tech in general as part of my DG portfolio, since I really want names that I can have a strong chance of holding for decades. Tech moves so fast (relatively), that I just don't have that confidence. Lately, though, I'm thinking that I should give it a closer look. There are clearly some strong companies in the space, and it would help to diversify my portfolio some.

As a starting point, I'd love to develop a better understanding even of the universe of stocks that you all think are "tech" and also quality candidates for a dividend growth portfolio. The names I seem to see often are:

MSFT, IBM, INTC, AAPL, CSCO, QCOM, ORCL

Is this the right universe, or are there others that should be on the list?

What percentage of your DG portfolio are you comfortable devoting to tech?

[EricL]

I own AAPL, IBM, MSFT and QCOM and they make up roughly 8% of my portfolio.

Some others to consider are HPQ (which I think could be a great rebound play), Accenture (ACN), CA Technologies (CA) and Molex (MOLX).

[Robert_NL]

I own MSFT and loving it.

[TomK]

Sorry in advance for the almost absurd crudity of the following, but at the very highest level, am I categorizing all of these properly?

IBM – IT, software, consulting, financing [2.1%]
AAPL – Hardware (retail) and software (retail) [2.3%]
MSFT – Hardware (retail) and software (enterprise and retail) [3.0%]
INTC – Chips [3.8%]
CSCO – Hardware (networking and communications) [3.2%]
QCOM – Hardware (networking and communications) [1.9%]
ORCL – Software (enterprise / database) [1.4%]
HPQ – Hardware (retail) [2.3%]
CA – IT, software, consulting [3.0%]
ACN – IT, consulting [2.4%]
MOLX – Hardware (electronic components) [2.5%]

So AAPL, MSFT, and HPQ are more or less competitors, I know.

IBM, CA, and ACN seem to be in the same type of business.

Do CSCO and QCOM compete directly, or are they focused on different pieces of the technology infrastructure?

Should any of INTC's competitors be on the list, or are they not dividend companies?

I'm inclined not to give QCOM or ORCL too much of my time, as their current yields are too low to excite me into a purchase, unless anyone is convinced that their earnings and dividends are set to grow like gangbusters over the next 5 years.

[fiveoh]

(12-06-2013, 10:58 AM)TomK Wrote: I almost posted this in Ronn’s “Thoughts on tech” thread, but then figured that would be a hijack, since that thread is really about CSCO vs ORCL vs QCOM. It made me want to start a more general conversation about tech stocks in a dividend growth portfolio.

I've always been pretty wary of tech in general as part of my DG portfolio, since I really want names that I can have a strong chance of holding for decades. Tech moves so fast (relatively), that I just don't have that confidence. Lately, though, I'm thinking that I should give it a closer look. There are clearly some strong companies in the space, and it would help to diversify my portfolio some.

As a starting point, I'd love to develop a better understanding even of the universe of stocks that you all think are "tech" and also quality candidates for a dividend growth portfolio. The names I seem to see often are:

MSFT, IBM, INTC, AAPL, CSCO, QCOM, ORCL

Is this the right universe, or are there others that should be on the list?

What percentage of your DG portfolio are you comfortable devoting to tech?

Intel has paid the same dividend for 6 quarters now and I'm not sure they will raise it Q1 like some people are hoping. I sold my position and wouldn't consider it in my DG portfolio unless I was ok with not having dividend raises every year(I'm not). It is a very cyclical company.

[EricL]

(12-06-2013, 03:01 PM)fiveoh Wrote: Intel has paid the same dividend for 6 quarters now and I'm not sure they will raise it Q1 like some people are hoping. I sold my position and wouldn't consider it in my DG portfolio unless I was ok with not having dividend raises every year(I'm not). It is a very cyclical company.

I agree. Same reason I sold earlier this year and shifted proceeds over to IBM.

[Kerim]

I agree that INTC is worrisome, but I haven’t given up on it yet. I have pared back my exposure, but still maintain a sizable position. INTC had a nice day today, by the way, lifted by general uplift in the market and an upgrade.

[TomK]

Thanks for the thoughts everyone. I'm thinking more and more that I will increase my exposure to tech, though I still have a lot more learning to do before I get comfortable. Given that I want to stick with the larger, more well-covered names, and that a decent starting yield matters to me, I think my universe for further study is:

CSCO, AAPL, INTC, IBM, and MSFT.

I think CSCO could be the one I move on first, as it appears at first glance to be the most beaten-up of the lot at the moment. Also, my gut tells me (danger! danger!) that this "internet of things" revolution is a real thing that is about to happen, rather than just another catchphrase. For example, as detailed in this MarketWatch article. Do you think it is wishful thinking? Already priced in?

[Kerim]

You’ve got me thinking about tech at a high level now too, Tom. Just a high-level thought for the moment: It seems to me that on the one hand, “tech” as a sector has to have a bright future. Technology is only going to become more and more central to everyday life, and more and more objects, appliances, etc. are going to become “smart.” This will require huge amounts of hardware, software, chips, electronic components, wireless network infrastructure, IT support, etc. etc. etc. On the other hand, though, some of the biggest tech names that would seem poised to reap the benefits of this seem to be struggling – for example INTC, CSCO, and IBM are all struggling with negative coverage and expectations at the moment, at least from some quarters. So what gives? Is it not the big names that are going to thrive? Then which firms will be the beneficiaries of this rising tech tide going forward? Is my thesis about the future of tech wrong?

[TomK]

(12-13-2013, 07:07 PM)Kerim Wrote: You’ve got me thinking about tech at a high level now too, Tom. Just a high-level thought for the moment: It seems to me that on the one hand, “tech” as a sector has to have a bright future. Technology is only going to become more and more central to everyday life, and more and more objects, appliances, etc. are going to become “smart.” This will require huge amounts of hardware, software, chips, electronic components, wireless network infrastructure, IT support, etc. etc. etc. On the other hand, though, some of the biggest tech names that would seem poised to reap the benefits of this seem to be struggling – for example INTC, CSCO, and IBM are all struggling with negative coverage and expectations at the moment, at least from some quarters. So what gives? Is it not the big names that are going to thrive? Then which firms will be the beneficiaries of this rising tech tide going forward? Is my thesis about the future of tech wrong?

Interesting observations, though I don't think I have any answers to your questions. Perhaps the market is just wrong about INTC and CSCO right now and these are good buying opportunities. I wish my conviction was somewhat stronger.