This Day On The Street
Continue to site
ADVERTISEMENT
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here

Investors Shift Focus To Growth Stocks

Financial and technology companies may not pay the biggest dividends right now, but they have large amounts of cash on their balance sheets. That means they are in a position to pay more money to shareholders.

Technology companies in the S&P 500 have $419 billion of cash on their balance sheets, accounting for about 40 percent of all cash held by S&P 500 companies, according to S&P Capital IQ data.

"Give me a balance sheet that's full of cash," says Morrow.

Take Apple. The technology giant said April 23 that it would distribute $100 billion to its shareholders by 2015, some of it in the form of higher dividends.

Technology companies haven't been the biggest dividend payers in the past. Currently, they pay average dividends of just 1.4 percent, but the trend is for higher payouts.

In 2004, tech companies in the S&P 500 paid just 0.3 percent. That trend is likely to continue as income-hungry investors put more pressure on companies to pay dividends.

BOND YIELDS ARE EDGING HIGHER

Rising interest rates are bad for stocks that pay big dividends. When long-term interest rates start to rise, bonds start looking attractive again to investors who are looking for income. That diminishes the appeal of defensive stocks.

Bond yields have risen this month on speculation that the Fed is considering easing back on its stimulus program as the economy improves. The Federal Reserve is spending $85 billion a month on buying bonds to push down interest rates.

The yield on the 10-year Treasury note rose to 2.03 percent on Wednesday, close to its highest level of the year, after minutes of the Fed's meeting earlier this month showed that some policymakers favored cutting back on stimulus as early June. The yield has climbed from 1.63 percent on May 3, its lowest of the year, before the April jobs report was published.

3 of 4

Check Out Our Best Services for Investors

Action Alerts PLUS

Portfolio Manager Jim Cramer and Director of Research Jack Mohr reveal their investment tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
Quant Ratings

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
Stocks Under $10

David Peltier uncovers low dollar stocks with serious upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
14-Days Free
Only $9.95
14-Days Free
Dividend Stock Advisor

David Peltier identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Updates with exact steps to take - BUY, HOLD, SELL
Trifecta Stocks

Every recommendation goes through 3 layers of intense scrutiny—quantitative, fundamental and technical analysis—to maximize profit potential and minimize risk.

Product Features:
  • Model Portfolio
  • Intra Day Trade alerts
  • Access to Quant Ratings
Options Profits

Our options trading pros provide over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.

Product Features:
  • Actionable options commentary and news
  • Real-time trading community
SYM TRADE IT LAST %CHG

Markets

Chart of I:DJI
DOW 16,058.35 -469.68 -2.84%
S&P 500 1,913.85 -58.33 -2.96%
NASDAQ 4,636.1050 -140.4030 -2.94%

Free Reports

Top Rated Stocks Top Rated Funds Top Rated ETFs