Milton Financials: Investors turn to technology rather than banks for higher dividends.

Oct. 13, 2010 - PRLog -- Companies in the IT industry overshadowed financials in total dividend payouts for the first time in the third quarter of this year. This is a marked change for IT companies who historically have held onto cash in order to reinvest it in research and development or make acquisitions. Now, under increasing pressure from yield-starved shareholders, companies such as Cisco Systems Inc. and Microsoft Corp. are opting to rather disburse some of that cash by introducing or increasing dividends, Milton Financials was informed.

“Tech has excess cash and the ability to pay, whereas financials will take a long time to get back to where they were,” a senior index analyst at Standard & Poor’s in New York told Milton Financials sources.


IT stocks accounted for 9.2 %of the almost $210 billion in dividends paid out by Oct. 7 whereas financial stocks delivered 8.9%, according to S&P figures. Prior to the global economic crisis, financial stocks accounted for 30% of dividend while IT weighed in with 5.7%.


James Meyer, a chief investment officer for investment management firm Tower Bridge Advisors believes that IT sector firms have come of age, meaning they have an increased cash flow while their capital needs have decreased.


“A large number of financial firms either reduced or eliminated their payouts because they accepted funds from the Troubled Asset Relief Program and are concerned about meeting certain capital requirements before repaying them,” Jeff Rubin, director of research at Westport, Connecticut-based Birinyi Associates told Milton Financials sources. “Although more IT stocks are paying dividends, investors should remember they still pay less than other industries.”


Rubin went on to highlight that telecommunications and utilities offer the highest yields, about 6.1% and 4.5% respectively and said he believed that banks could begin paying higher returns by as soon as 2011.

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