The tech stocks whose dividend yields top sales growth
Judging by their financial metrics, a group of large-cap technology companies once thought of as drivers of a new, tech-based economy now look downright stodgy.
Microsoft (MSFT), Intel (INTC), Cisco Systems (CSCO) and IBM (IBM) all pay dividends whose yields are higher than the expected revenue growth rates for their current fiscal years.
Healthy dividends combined with weak or negative growth make them look more like plays in utilities or telecom.
While their status as income stocks isn't new, the figures in the chart below show they don't belong in growth portfolios. That's because selling hardware or software to corporations or consumers is no longer a tech growth driver.
Sales at Microsoft and IBM are expected to fall in the current year, while Cisco revenue is seen flat and Intel sales are expected to creep up 3%.
By contrast, the vast majority of growth in the sector this year will come from Internet companies that provide enabling technologies and platforms for selling something other than tech products.
Alphabet (GOOGL) and Facebook (FB), for example, sell online advertising, while Amazon (AMZN) is a retailer that sells online.
The three firms' annual sales are expected to grow 16%, 44% and 25%, respectively.
None of those three companies pays a dividend, choosing instead to re-invest their profits.
With sales at Apple (AAPL) seen falling 7.5% in the current year, more than half of the new business in the tech industry will come from the Internet sector.
Alphabet, Amazon and Facebook are expected to capture a combined $47 billion in additional revenue this year, with Amazon alone accounting for $27 billion of it.
Salesforce, Adobe, AT&T
To be sure, some large software companies, including Salesforce (CRM) and Adobe Systems (ADBE), sell into enterprise or consumer markets that generate double-digit annual growth.
Both are expected to grow 20% or more in their current, respective fiscal years.
But the pair between them will add less than $3 billion in new business, according to Wall Street estimates, a tiny fraction of what Amazon, Facebook and Amazon will do.
It's a similar story for certain sub-sectors in security and storage, as well as the market for cloud computing services.
While Microsoft (MSFT) and Oracle (ORCL) are posting double-digit cloud growth, they lag behind market leader Amazon in that business and their cloud-related sales are still small relative to overall revenue.
AT&T outlier
One other source of 2016 growth worth mentioning will come from AT&T (T).
Thanks to a series of acquisitions, the wireless giant is seen boosting sales more than 12% this year.
AT&T is notable because even though it has a reputation among investors as a staid telecom stock, both its dividend yield and its expected revenue growth are now higher than the former 'New Economy' giants.
Microsoft is expected to post 2.2% lower sales for the year ending this month, for example, while IBM revenue for 2016 is seen dropping 3%.
Cisco is expected to post flat sales for its fiscal year ending in July, while paying a dividend of 3.75%.
Intel sales are expected to rise 3.1% this year, but that's lower than its dividend yield of 3.3%.
The numbers show these names are no longer tech growth stars but rather stocks more at home in the conservative portfolios of income investors.
2016 expected revenue growth, dividend yield
Intel, +3.1%, 3.3%
Cisco, flat, 3.75%
Microsoft, (-2.2%), 2.9%
IBM, (-3%), 3.8%
Apple, (-7.5%), 2.4%
Source: Thomson Financial
John Shinal has covered tech and financial markets for more than 15 years at Bloomberg, BusinessWeek,The San Francisco Chronicle, Dow Jones MarketWatch, Wall Street Journal Digital Network and others. Follow him on Twitter: @johnshinal.