Technology stocks have continued to rebound from their mid-winter retreat helped by record earnings and strengthening outlooks.
The strong quarterly results have prompted a number of dividend increases which have helped the sector regain its footing as investors reassess long-term prospects beyond the pandemic.
The long term energizers are still attractive and include continued growth in cloud-based internet and data storage, rapid growth in technologies including autonomous and electric vehicles, artificial intelligence, learning software and home-based work and entertainment.
In earnings reported at the end of July:
- Microsoft Corp. (NDQ: MSFT) capped a year of strong performance with a quarterly record as the pandemic boosted demand in key areas where it operates. This includes data storage, internet security and cloud services. Revenues in the three months ending June 30 were 21% higher than a year earlier at US $46.2 billion and profits rose 47% to $16.5 billion.
- Google’s parent Alphabet Inc. ( NDQ:GOOG) earned US $18.5 billion in its latest quarter. As recently as 2015, it made less than that in an entire year, reported the New York Times. The Times added that Alphabet’s growth rate is one rarely achieved by companies its size, “but the pandemic has erased all the limits for tech firms.”
- Apple Inc.’s (NDQ:AAPL) profit almost doubled in its latest three months, showing that the world’s most valuable company is not slowing down. Net income increased 93 percent to US $21.7 billion, while sales rose 36 percent to $81.4 billion. Both exceeded analysts’ expectations.
- Texas Instruments Inc. (NDQ: TXN) also beat Wall Street estimates in its second quarter, helped by a 41% rise in revenue to $4.58 billion. Gains came from its analog chips and embedded processing businesses. Quarterly net income of $1.93 billion was also 40% higher than a year ago.
While investors traditionally turn to technology stocks for growth, dividends have been rising as the sector has matured,
Harvest Portfolios Group portfolio manager James Learmonth notes that the sector has room for more dividend growth. On average they have paid out 19.5% of free cash flow in the form of dividends over the past 12 months up.
He notes 12 of the 13 companies in Harvest’s Tech Achievers Growth and Income ETF that pay dividends have raised them in the past year.