|
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. As yields have risen, the big dividend-paying stocks, utilities and telecommunication companies, have fallen. HOPEFUL SIGNS ON EARNINGS Another reason investors are starting to take a shine to technology stocks is that their earnings are showing signs of picking up. Microsoft delivered solid results last month from its Office, software tools and Xbox divisions. Google, the leader in Internet search, raised prices for ads distributed to smartphones and tablet computers. The company's stock climbed above $900 for the first time May 15. Even the outlook for Hewlett-Packard is improving. The company's stock surged 17 percent Wednesday after the struggling PC maker reported quarterly earnings that weren't as bad as analysts had been expecting. That encouraged investors to think that HP's turnaround strategy may succeed. THE CAVEAT The nascent rally in growth stocks may be short-lived if the economy fails to build on its performance in the first quarter, says Barry Knapp, head of equity strategy at Barclays Capital. Barclays predicts that U.S. growth will slow to 1.5 percent in the second quarter, from 2.5 percent in the first quarter, as the economy is held back by government spending cuts. "If it becomes clear that we're growing at that sort of a rate in the second quarter, and we don't see much of a pickup in the third quarter, I don't really see how the cyclical names could continue their current bounce," says Knapp.
[Associated
Press;
Copyright 2013 The Associated
Press. All rights reserved. This material may not be published,
broadcast, rewritten or redistributed.
News | Sports | Business | Rural Review | Teaching & Learning | Home and Family | Tourism | Obituaries
Community |
Perspectives
|
Law & Courts |
Leisure Time
|
Spiritual Life |
Health & Fitness |
Teen Scene
Calendar
|
Letters to the Editor