Chris Preston: Strong dividend stocks are popping up everywhere these days. Even in the places you’d least expect.
With Janet Yellen and the Fed still holding short-term interest rates near zero, dividend stocks are still the in thing on Wall Street these days. It seems everyone is getting in on the act.
According to FactSet, 425 of the 500 companies that comprise the S&P 500 now pay a dividend, higher than at any point since 1995. Those companies paid a combined $90.5 billion in dividends in the first quarter. Dividends per share have now increased by double digits for 13 consecutive quarters. At 31.9%, the dividend payout ratio (a ratio of dividends to earnings) is near its highest level since the recession.
Simply put, with money market accounts, certificates of deposit and U.S. Treasurys offering little to no yield, income investors are flocking to dividend stocks more than at any point in nearly two decades. Recognizing that movement, more companies are jumping into the dividend-paying pool.
As a result, generous dividend payers are turning up in some pretty unexpected places.
Utilities, financials and basic materials have long been the most common places to find dividends. Those sectors may not offer the greatest share price appreciation, but they make up for it with steady dividend growth and low volatility. Today, those traditional dividend strongholds have plenty of company. With 85% of all S&P 500 stocks paying a dividend, you can find yield just about anywhere.
Here are three strong dividend stocks in three decidedly nontraditional areas for income:
Cisco Systems (NASDAQ: CSCO)
Yield: 3%
Dividend Initiated: 2011
On Wall Street, technology is synonymous with growth, not safety. Or at least that used to be the case.
No longer.
Tech is suddenly the fourth-highest-yielding sector, trailing only the three traditional dividend sectors. An increasing number of tech companies are joining the dividend fray. Cisco Systems is one of the latest to do so.
The largest manufacturer and provider of networking equipment initiated a dividend in March 2011. Since then, the quarterly payout has more than tripled. Cisco currently pays a dividend of 19 cents per share, more than three times the 6-cent-a-share quarterly dividend the company paid as recently as early 2012. The 3% yield trumps that of fellow blue-chip dividend payers in the tech sector, Apple (NASDAQ: AAPL), Intel (NASDAQ: INTC) and Microsoft (NASDAQ: MSFT).
Given that many high-profile tech stocks still stubbornly refuse to pay a dividend – I’m talking to you, Google (NASDAQ: GOOG), Facebook (NASDAQ: FB) and Yahoo (NASDAQ: YHOO) – Cisco is the rare tech stock that offers a generous yield.
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