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4 Tech Stocks With Dividend Potential

On the heels of Cisco's dividend announcement, here are four more tech companies that have the potential to initiate dividends soon.

By Roberto Pedone



) -- You've probably heard by now that networking giant

Cisco Systems

(CSCO) - Get Free Report

has said it plans to

initiate a dividend of 1% to 2%

for its fiscal year 2011. At an analyst meeting in San Jose, Calif., Cisco CEO John Chambers said the exact amount would be influenced in part by what Congress does with the personal tax rate on dividend income and the corporate tax and repatriate earnings.

Currently, a majority of corporate dividends are taxed at around 15%. If Congress decides to let the Bush tax cuts expire and do nothing, dividends next year will skyrocket toward the ordinary income rate of up to 39.6%. President Obama has said he favors a tax rate of 20% on dividends.

Cisco isn't the first big-name tech company to announce it's going to pay a dividend. Currently, tech firms


(MSFT) - Get Free Report



(INTC) - Get Free Report



(ORCL) - Get Free Report



(HPQ) - Get Free Report



(QCOM) - Get Free Report

all pay dividends.

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Here 's a look at

a number of tech companies

that could start paying a dividend due to their ridiculous cash hoards.

Microsoft started paying a regular cash dividend in 2003 and even declared a $3 special payout in 2004 to help lighten its cash on hoard. Even after that, the software giant still has $36 billion of cash on its balance sheet. It looks like the software king is just getting started with its dividend spree. On Monday,


reported that an unnamed source said that Microsoft is looking to tap the debt markets and use any money raised to

fund a higher dividend

and do more stock buybacks.

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Plain and simple, many tech companies that are sitting on a ton of cash are becoming mature along the growth curve. There are a few exceptions, such as


(AAPL) - Get Free Report

, which has a war chest of $24 billion in cash and is still managing superior growth. The rest of the group just seems to be too big and lacking in product innovation to recharge their growth engines.


who could be next

in the tech sector to shock the investment community with a dividend announcement?

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If you're looking for a tech company that absolutely has the capability to a pay a dividend, then you need look no further than BlackBerry maker

Research In Motion


, which has more than $2.3 billion of cash on its balance sheet and zero debt. The popular BlackBerry is rapidly losing smartphone market share to Apple's iPhone and


(GOOG) - Get Free Report

Android. Also, Apple's iOS and Google's Android operating systems are now serving business users. That's going to make RIM's stranglehold on the corporate customer very challenging to maintain in the future.

RIM's worldwide smartphone market share dropped to 18.2% in the second quarter from 19% a year earlier, helping to push the stock down 33% year-to-date. Right now would be a perfect time for RIM to step up and reward its suffering shareholders by returning some of that cash. The company is set to report its quarterly earnings numbers today after the market close. What a great surprise it would be if RIM decided to announce a dividend.

>>>Who Owns RIM?: Renaissance Technologies

It would be an even bigger surprise for anyone who's currently betting against the stock. A new dividend could cause the bears to scramble and cover their positions, since anyone who is short the stock is liable to pay the dividend if they're short as of the ex-dividend date. And believe me, there are a ton of bears circling around RIM. As of Aug. 31, the short interest in the stock has more than doubled from the level last seen on Apr. 15, to 31 million shares.

Another tech company that can easily afford to pay a dividend due to its large cash position is online retailer

(AMZN) - Get Free Report

. Currently, Amazon has more than $5 billion in cash on its balance sheet and only $132 million in debt.

It's true that investors don't usually love when a growth company like Amazon pays a dividend, because shareholders would rather see these high-growth machines use their cash for expansion. But with Amazon, they don't have to actually build brick-and-mortar stores to expand and grow, a huge cost savings. Instead, Amazon can utilize its in-house technological advantages or outsource its tech needs to build out the company's Web presence and expand to anywhere in the world.

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I think investors would take the stock up if Amazon announces a dividend because it would prove that management is truly in line with long-term shareholders.

A very popular tech company that should seriously consider paying a dividend is search engine giant Google, which currently sits on more than $30 billion in cash and has zero debt. Up to this point, Google has used its cash to do acquisitions, most of which have been of small, unheard-of companies, which Google ends up paying a ridiculous amount of money for, with the primary goal of adding functions and extensions to existing product. Only a few, such as Android and YouTube, have created new streams of revenue. Maybe it's time for Google to cool off on the acquisitions and return some cash to its shareholders.

One last tech company that could start returning more cold hard cash to its shareholders is



. This company designs, develops and supplies semiconductors for wired and wireless communications. Broadcom has more than $2 billion of cash on its balance sheet with zero debt. The company currently pays a dividend of $0.32 a share, but that only equates to about 0.90% in yield. That's extremely low, so Broadcom should step up and raise its dividend so the stock can yield something much higher closer to 3%.

>>>Who Owns Broadcom?: Navellier & Associates

Hopefully, Cisco's announcement to pay a dividend is just the start for the tech complex. Once Cisco begins its program, all 30

Dow Jones

components will pay a dividend. For far too long, many tech companies have avoided paying dividends because they have convinced shareholders that they need their cash for growth. That just isn't true, now that many of these growth stories have either hit their peak or will just simply never return to their hyper-growth days of the past.

To see more tech stocks that could start paying a dividend, including

Texas Instruments

(TXN) - Get Free Report



(EBAY) - Get Free Report

, check out the

Potential Dividend Paying Tech Stocks

portfolio on Stockpickr.

-- Written by Roberto Pedone in Winderemere, Fla.


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At the time of publication, author had no positions in stocks mentioned.

Roberto Pedone, based out of Windermere, Fla., is an independent trader who focuses on stocks, options, futures, commodities and currencies. He is also an outside contributor to and maintains the website, which he sold to Blue Wave Advisors in 2008. Roberto studied International Business at The Milwaukee School of Engineering, and he spent a year overseas studying business in Lubeck, Germany.

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