{"id":38339,"date":"2013-05-17T11:39:41","date_gmt":"2013-05-17T15:39:41","guid":{"rendered":"http:\/\/countingpips.com\/forex-news\/?p=38339"},"modified":"2013-05-17T11:39:41","modified_gmt":"2013-05-17T15:39:41","slug":"want-dividend-growth-go-for-big-tech-over-utilities","status":"publish","type":"post","link":"https:\/\/www.investmacro.com\/forex-news\/2013\/05\/17\/want-dividend-growth-go-for-big-tech-over-utilities\/","title":{"rendered":"Want Dividend Growth? Go for Big Tech Over Utilities"},"content":{"rendered":"

By The Sizemore Letter<\/u><\/a> <\/p>\n

Investors are starved for yield.\u00a0 It\u2019s not exactly breaking news.\u00a0 With traditional savings vehicles such as savings accounts, CDs, and bonds yielding next to nothing, investors have been flocking to dividend-paying stocks for years.<\/p>\n

On the surface, this makes all the sense in the world.\u00a0 Unlike fixed income investments, dividend-paying stocks tend to enjoy rising payouts over time (or at least they do if you choose them well).<\/p>\n

There\u2018s just one problem with this.\u00a0 Defensive, dividend-paying sectors are, as a group, expensive relative to the broader market.\u00a0 Investors are paying a premium for slow growth\u2026which is not exactly a recipe for long-term investment success.<\/p>\n

As an example, consider the utilities sector.\u00a0 The Utilities Select Sector SPDR ($<\/span>XLU<\/a>),<\/b> a popular ETF proxy for the sector, trades for 16 times earnings and yields just 3.7%.<\/p>\n

Utilities have had good multi-year runs.\u00a0 In the 2003-2007 bull market, utilities were actually one of the best-performing sectors.\u00a0 But it\u2019s hard to get excited about them at current prices.<\/p>\n

Surprisingly, some of the best dividend deals on offer are in the tech sector. \u00a0Microsoft ($<\/span>MSFT<\/a>), Intel ($<\/span>INTC<\/a>) <\/b>and Cisco Systems ($<\/span>CSCO<\/a>)<\/b> yield 2.8%, 3.7% and 3.2%, respectively, and all trade at very modest valuations.\u00a0 All have also been aggressively raising their dividend in recent years. Cisco has nearly tripled its dividend in the past year and a half, and Microsoft and Intel have raised their dividends by 15% and 7%, respectively, in the past year.\u00a0 Not bad for boring \u201cold\u201d technology companies.<\/p>\n

If you are building an income portfolio, you have a choice.\u00a0 You can load on slow-growth utilities.\u00a0 Or, you can build a portfolio of solid technology companies with dividends not too much lower that offer far great potential for growth in the dividend stream over time.\u00a0 The choice should be obvious.<\/p>\n

Action to take:<\/strong> Buy \u201cBig Tech\u201d for dividend growth.\u00a0 Use a stop loss appropriate for your risk tolerance; I recommend something in the ballpark of a 20% trailing stop.<\/p>\n

This article first appeared on TraderPlanet<\/a>.<\/p>\n

SUBSCRIBE\u00a0<\/b><\/a>to\u00a0Sizemore Insights<\/em>\u00a0via e-mail today.<\/p>\n

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