3 Tech Stocks That Pay Dividends

By Aryeh Katz | April 21, 2010 AAA

It's nearly a given in the investment business that 'old line' companies pay dividends and tech outfits don't. The generalization does hold for the most part. Tech stocks tend to be growth stocks. Management prefers to retain earnings, reinvest in the business and capture as much capital gain as possible for investors, rather than rewarding them with quarterly dividends. There are always exceptions. Below we highlight three tech outfits that offer exceptional dividends to stockholders, and that possess strong fundamentals, too.
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Turning Internet into Income
Earthlink, Inc. (Nasdaq:ELNK) shares are up nearly 21% for the in the last year and pay investors a strong 6.40% annual dividend. The company's price/earnings ratio is just 3.30 and price to book is a very reasonable 1.25. Institutional investors currently hold a full 95% of the company's float.

Earthlink is an internet service provider that operates across the continental U.S. It has a current market capitalization just shy of $930 million.

Racing for the Top
Formula Systems Ltd. (Nasdaq:FORTY) is an Israeli based company that offers investors a robust 11.67% dividend and trades with a multiple of 11.69 times last year's earnings.

Although the stock did experience a brief pullback last month, Formula's growth trajectory has been very constant. Its been rising in (nearly) a straight line from $4.90 a year ago to its current $12.20 level, for a total twelve month gain of better than 150% exclusive of the dividend. That compares favorably with the tech market as a whole, which was up 50% in that time frame as measured by the Powershares QQQ Trust (Nasdaq:QQQQ) - perhaps the best available proxy for the tech-laden Nasdaq index.

Formula is in the business of designing customized software solutions for global corporate clients.

Hi Dividends, Acceptable Returns
HiMax Technologies, Inc. (Nasdaq:HIMX) is a designer and manufacturer of semiconductor technology for use in flat-screen applications like televisions and laptop computers. HIMX shares trade with a P/E of 9.75 and carry an annual dividend yield of 9.62%. In the last year, the shares are up 11%. This is far less than the Semiconductors HOLDRS ETF (NYSE:SMH), which grew by better than 47% in the same period. However, it's worth repeating that the dividend is over 9%.

The Wrap
These techs are paying dividends and they're also offering great numbers for value investors. Who said all tech issues had to be growth stocks? (Discover the issues that complicate these payouts for investors. To learn more about dividends, read Dividend Facts You May Not Know.)

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