There are some pretty diverse styles and stocks that fall under the heading of investing, but nothing is more synonymous than growth investing and technology stocks. After all, new devices, software and future equipment scream economic expansion and fast-moving markets. The fast movers are still there, (NYSE:CRM) is just one example, but the technology sector seems to be making major strides toward maturity.

Today's tech sector is far removed from the land of the dotcoms era, when "all hype, no revenue" companies such as were the sector's primary go-to investment. During the Internet boom, many companies in the sector were new businesses, committing capital to research and development and M&A efforts. However, a decade after the tech bubble burst, many of those surviving companies have matured into firms with strong balance sheets and financial flexibility. That financial stability is leading to one thing - big dividends.

For those investors looking for income solutions, the technology sector now offers one of the best stomping grounds to find growing payments.

Forex Broker Guide: Using the right broker is very essential when competing in today's forex marketplace

Big Cash Balances and Dividend Growth
While most income investors flock to boring utilities or consumer staples firms when looking for equity income, they may want to focus their attention on the high-tech world. The technology sector is quickly becoming a leading dividend machine. According to S&P, technology stocks now account for 14.22% of the dividends paid out by members of the S&P 500; that's up from 5.95% in 2007. Currently, 41 of the 71 tech stocks in the S&P 500 pay dividends.

What's more impressive is that the list continues to grow. Moody's projects that the tech sector will pay out roughly $26 billion in dividends in 2012. That is an increase of 14.3% from 2011 and higher than the 10.9% average annual dividend growth of the prior four years. For example, Apple Inc. (Nasdaq:AAPL) paid its first dividend ever this summer, while Cisco Systems (Nasdaq:CSCO), which only started paying a dividend in March of 2011, and Microsoft (Nasdaq:MSFT), which began paying in 2003, both increased their dividends in August.

Likewise, the sector's dividend growth rates have surpassed other traditional equity income safe-havens. Over the last five years, ending in April 2011, technology stocks have increased their dividend payouts by roughly 16.49% annualized. That bests utilities (5.09%), consumer goods (6.36%) and telecom firms (6.05%) by a wide margin.

SEE: The Perks of Dividend Reinvestment Plans

Long-Term Dividend Growth Ahead
There are plenty of bullish catalysts that will help drive the sector's growing payments into the future. First, our ever-more-complicated lives revolve around technology. It seems that everything we touch - from our cell phones to our toasters - has some form of microchip inside. Internet usage continues to grow at a rapid pace, as has the adoption of computers and smartphones.

As this relationship with technology continues to advance, the long-term demand for semiconductors, communications gear, software and other high-tech equipment is assured. In the emerging world, as middle class incomes continue to rise, this bond with technology is just beginning. As these citizens embrace technology, the sector will continue to thrive.

The fact that technology has become an indispensable part of our lives is also producing tons of cash for firms that operate in the sector. Many of the former high-flying tech darlings of the dotcom days have matured into money-hoarding kings as their software, servers and services bring in a steady flow of cash. For example, Apple has roughly $110 billion in cash on its balance. Those huge balances enable tech firms to not only plow some of that money back into growing the company, but also pay shareholders handsomely.

Overall, the long-term trend toward more technology usage, plus the current cash flow trajectories of the sector's firms, is a win-win for income seekers.

SEE: How Technology Can Save You Money

Buying Some Tech Yield
For investors wanting to add some high-tech dividends to a portfolio, the individual stock route is certainly doable. A host of tech stalwarts like Dell (Nasdaq:DELL), Oracle (Nasdaq:ORCL) and Qualcomm (Nasdaq:QCOM) all pay growing dividends. However, a broad approach could be best.

The new First Trust Nasdaq Technology Dividend Index (Nasdaq:TDIV) is an ETF that tracks a basket of high-tech dividend payers. For inclusion in the ETF, each security must have a minimum market capitalization of $500 million, have a minimum three-month average daily dollar trading volume of $1 million and have paid a regular or common dividend within the past 12 months that yielded at least 0.5%.

Despite being new, the fund could offer investors the best way to play the technology sector's rise as a premier income-seeking stomping ground.

SEE: How To Pick The Best ETF

The Bottom Line
Despite its go-go glory days, the technology sector is maturing into a dividend hunter's paradise. Payouts are on the rise and cash flows remain robust. For investors, the sector offers some of the best dividend growth opportunities around and proves that tech isn't just for growth anymore.

At the time of writing, Aaron Levitt did not own shares in any of the companies mentioned in this article.

Related Articles
  1. Mutual Funds & ETFs

    ETF Analysis: ProShares UltraPro Nasdaq Biotech

    Obtain information about an ETF offerings that provides leveraged exposure to the biotechnology industry, the ProShares UltraPro Nasdaq Biotech Fund.
  2. Mutual Funds & ETFs

    ETF Analysis: iShares MSCI Europe Financials

    Learn about the iShares MSCI Europe Financials fund, which invests in numerous European financial industries, such as banks, insurance and real estate.
  3. Mutual Funds & ETFs

    ETF Analysis: SPDR S&P Insurance

    Learn about the SPDR S&P Insurance exchange-traded fund, which follows the S&P Insurance Select Industry Index by investing in equities of U.S. insurers.
  4. Mutual Funds & ETFs

    ETF Analysis: SPDR S&P Emerging Markets Small Cap

    Learn about the SPDR S&P Emerging Markets Small Cap exchange-traded fund, which invests in small-cap firms traded at the emerging equity markets.
  5. Mutual Funds & ETFs

    ETF Analysis: ETFS Physical Platinum

    Learn about the physical platinum ETF. Platinum embarked on a bull market from 2001 to 2011, climbing to record prices along with other precious metals.
  6. Mutual Funds & ETFs

    ETF Analysis: iShares MSCI Turkey

    Learn about the iShares MSCI Turkey exchange-traded fund, which invests in a wide variety of companies' equities traded on Turkish exchanges.
  7. Mutual Funds & ETFs

    ETF Analysis: PowerShares S&P 500 Downside Hedged

    Find out about the PowerShares S&P 500 Downside Hedged ETF, and learn detailed information about characteristics, suitability and recommendations of it.
  8. Mutual Funds & ETFs

    ETF Analysis: Guggenheim Enhanced Short Dur

    Find out about the Guggenheim Enhanced Short Duration ETF, and learn detailed information about this fund that focuses on fixed-income securities.
  9. Mutual Funds & ETFs

    ETF Analysis: iShares US Oil&Gas Explor&Prodtn

    Learn about the iShares U.S. Oil & Gas Exploration & Production ETF, which provides an efficient way to invest in the exploration and production sector.
  10. Mutual Funds & ETFs

    ETF Analysis: iShares Morningstar Small-Cap Value

    Find out about the Shares Morningstar Small-Cap Value ETF, and learn detailed information about this exchange-traded fund that focuses on small-cap equities.
  1. Equity

    The value of an asset less the value of all liabilities on that ...
  2. Exchange-Traded Fund (ETF)

    A security that tracks an index, a commodity or a basket of assets ...
  3. Exchange-Traded Mutual Funds (ETMF)

    Investopedia explains the definition of exchange-traded mutual ...
  4. Hard-To-Sell Asset

    An asset that is extremely difficult to dispose of either due ...
  5. Sucker Yield

    When an investor has essentially risked all of his capital for ...
  6. Lion economies

    A nickname given to Africa's growing economies.
  1. What is the difference between called-up share capital and paid-up share capital?

    The difference between called-up share capital and paid-up share capital is investors have already paid in full for paid-up ... Read Full Answer >>
  2. Why would a corporation issue convertible bonds?

    A convertible bond represents a hybrid security that has bond and equity features; this type of bond allows the conversion ... Read Full Answer >>
  3. What does a high turnover ratio signify for an investment fund?

    If an investment fund has a high turnover ratio, it indicates it replaces most or all of its holdings over a one-year period. ... Read Full Answer >>
  4. Does index trading increase market vulnerability?

    The rise of index trading may increase the overall vulnerability of the stock market due to increased correlations between ... Read Full Answer >>
  5. How does additional paid in capital affect retained earnings?

    Both additional paid-in capital and retained earnings are entries under the shareholders' equity section of a company's balance ... Read Full Answer >>
  6. What types of capital are not considered share capital?

    The money a business uses to fund operations or growth is called capital, and there are a number of capital sources available. ... Read Full Answer >>

You May Also Like

Trading Center

You are using adblocking software

Want access to all of Investopedia? Add us to your “whitelist”
so you'll never miss a feature!