Apple and Microsoft have turned tech into a dividend-paying paradise

Investors weren’t overly impressed my Microsoft’s plan to boost its dividend and buy back $40 billion in shares.
Investors weren’t overly impressed my Microsoft’s plan to boost its dividend and buy back $40 billion in shares.
Image: Reuters / Dado Ruvic
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Maybe tech investors have become spoiled by the lavish dividends of recent years.

The market just shrugged off the news that Microsoft is going to buy back another $40 billion worth of stock and boost its dividend by 22%. Shares are up a mere 0.5%.

But remember, during the peak of Microsoft’s powers in 1990s the idea of the tech behemoth even offering a dividend was laughable. And investors wouldn’t have wanted one. At that time, the tech sector was where the risk-hungry roamed in search of the next growth stock. If you were looking for staid, dividend-paying securities, tech was the last place you went.

Times have changed. Over the last year, technology has been the top sector of the S&P 500 when it comes to doling out dividends. Before Microsoft made its announcement this morning, year-over-year dividend growth was up 62% at the company. That left the second-best sector for dividend growth, financials, in the dust: dividends per share were up only 19% over the trailing 12 months (TTM), according to an analysis from market research company FactSet.

Of course, a large part of this overall increase is due to one company: Apple, which announced a dividend in March 2012 and boosted it significantly this year. In fact, Apple has pushed $10.28 billion in dividends to shareholders over the last 12 months, second only to ExxonMobil, which paid out $10.57 billion over the same period.

But even without Apple, the tech sector would have still been the best dividend payer over the last year, with dividends-per-share rising 26%, according to FactSet. And for what it’s worth, Microsoft is no slouch when it comes to dividends. It paid out $7.46 billion in dividends over the last 12 months, the fifth largest amount in the S&P 500.

Meanwhile, rising tech dividend payments are part and parcel of a broad-based increase in shareholder payouts in the stock market. Corporations have increasingly turned to payouts to coax stock-averse investors—many of whom were burnt in the market tumble of 2008—into owning shares.  Over the last 12 months dividend payments for S&P 500 stocks amounted to $329 billion. That’s more than double the level of 2003 and about 38% higher than the 10-year average, according to FactSet. Take a look.