Neither rain nor sleet nor European crisis will prevent techs from upping dividends and others to start offering.
Their cups runeth over. According to a Moody’s Investor Service report, cash-rich technology companies are both upping their dividend payouts or entering the dividend-paying world for the first time in a bigger way than last year. “By and large, technology companies have been raising or implementing dividends in concert with rising cash flow generation,” Moody’s wrote in its report.
And while many companies in other sectors plan to sock away cash for liquidity purposes (see related story here), and in some cases to be “ultra-liquid” in light of European uncertainty (see related story here), tech firms – sidestepping those euro-worries — will pay more dividends this year than last. Moody’s expects dividend payments by rated technology firms will increase 14.3 percent to $25.6bn in 2012, vs. $22.4bn last year.
Companies have been well positioned over the past few years to deploy their growing cash piles. Some have chosen to buy back stock – in June there have been about 30 announced stock buybacks. Some companies like Oracle are actually doing both a buyback and a dividend. Quite a feat for Oracle cash managers, who must contend with 84 percent of the company’s cash being stuck overseas.
In terms of cash held overseas, Moody’s said this has a big impact on dividends. For example, Oracle as well as Cisco paid out just 9 percent and 13 percent, respectively, of their discretionary cash flow over the last 12 months, in part because they maintain most of their cash offshore. This is vs. an average of 21 percent of discretionary cash flow for other tech companies. Moody’s also noted that techs are still well under other sectors in terms of dividend amounts, which average about 40-50 percent of discretionary cash flow.
Not all tech companies are in a dividend mood, however, Moody’s said. Google and eBay aren’t expected to issue dividends in the near term, Moody’s said, likely as a result of a focus on domestic cash management “and other strategic deployment of capital.”