Monday, April 11, 2011

Dividends from (INTC) (HPQ) (ORCL) (CSCO) Show Growth Slowing

With the new dividend religion becoming pervasive in the tech sector, as companies such as Intel (NASDAQ:INTC), Hewlett-Packard (NYSE:HPQ), Oracle (NASDAQ:ORCL) and Cisco (NASDAQ:CSCO), send the message loud and clear that these more mature companies have seen their day of extraordinary growth, and that day is now over.

These companies have attracted shareholders and investors in the past interested in making quick returns. That will now change, as investors, amazingly, will start to think of these companies as places of safety and consistency, an interesting twist.

That's not to say some of these companies, or others, don't have some spring left in their steps. It's just that even with spending more than they have in the recent past, the leadership of these companies understand they won't be able to match the growth of the past now that they have matured.

"There comes a time, and we're going through it, where you realize that we're not going to grow the way we used to," said Kevin Sellers, vice president of investor relations at Intel Corp., which raised its dividend in November. "Dividends represent the most tangible realized return that investors can get in an uncertain market."

Every tech company will ultimately reach this place, even the mighty Apple (NASDAQ:AAPL), which hasn't offered dividends yet, as they are still a growth machine in spite their size. But the day will come when they will offer dividends, and when they do, you know they're at the size and market saturation point where past growth levels are no longer sustainable.

These aren't bad things in any way, just a different way to invest and a different shareholder to attract in light of changing conditions.

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