What are technology stocks?
Similar to any other industry, companies in the tech sector come in all sizes.You will find emerging start-ups as well as billion-dollar giants that arehousehold names in this space. A technology company is one that is involved inthe development and distribution of hardware and software products orservices.It is an exciting sector that is home to several emerging trends includingartificial intelligence, blockchain, cloud computing, SaaS (software-as-a-service), machine learning, online streaming, e-commerce, and many more.While tech stocks south of the border are popular all over the world, Canada-based companies are slowly carving a niche in the last few years.One way to invest in Canadian tech stocks is by purchasing ETFs such as theiShares S&P/TSX Capped Information Technology Index which gives youdiversified exposure to the largest companies in the country. The ETF has beenon an absolute tear and has returned close to 500% since May 2011.On the other hand, you can also look to buy and hold shares of individualcompanies that have the potential to grow your wealth at a market-beatingrate. An ideal tech stock is one that is part of a rapidly expandingaddressable market allowing it to grow top-line and profitability at a fastclip.Here, we take a look at a few Canadian tech stocks that should beat theoverall market not just in 2021 but over the long-term as well.
Top financial stocks for beginners
These are some mature, easy-to-understand financial sector businesses that aresmart choices for beginner investors:1. Berkshire Hathaway (NYSE:BRK.A)(NYSE:BRK.B) is not always thought of as afinancial sector stock, but it is an insurance company at heart. Led by WarrenBuffett, Berkshire is the parent company of GEICO, and it also runs a massivereinsurance operation. Investors in the company gain exposure to its massivestock portfolio, which happens to own large stakes in several major U.S.banks.2. JPMorgan Chase (NYSE:JPM) is the largest U.S. bank and the largest companyof any kind in the financial sector. It’s tough to make a case againstJPMorgan Chase as an investment. The bank consistently posts some of thehighest profitability metrics in the industry and has vast operations in bothconsumer and investment banking.3. Visa (NYSE:V) operates the world’s largest payment network, and, alongwith Mastercard (NYSE:MA), has half of a near-duopoly over the paymentprocessing industry. But don’t make the mistake of thinking Visa doesn’t haveroom to grow. The company currently processes about $9 trillion in paymentsper year — a small slice of the global cashless payment market that thecompany’s management values at $185 trillion — and growing.As for financial sector exchange-traded funds (ETFs), the Vanguard FinancialsETF (NYSEMKT:VFH) is the best. This fund confers portfolio exposure to theentire financial sector and for a low annual fee. This fund provides exposureto a total of 408 different financial sector stocks, weighted according totheir market capitalizations. (More of the fund’s assets are invested in thelarger financial companies.) In addition to the three companies alreadymentioned, top holdings include Bank of America (NYSE:BAC), Citigroup(NYSE:C), BlackRock (NYSE:BLK), and Morgan Stanley (NYSE:MS).
Two important metrics for analyzing insurance stocks:
* Combined ratio: To compute this ratio, first add (combine) the amount of money an insurance company pays out in claims to the amount of money the company spends on other business expenses. Divide that amount by the amount the insurance company collects as premium income and verify that the result is less than 100%. A lower combined ratio indicates the insurer is generating greater profit. * Investment margin: Insurers profit from underwriting policies and also make money by investing the premiums they collect instead of just holding that money to pay any insurance claims. How profitably an insurer invests — its investment margin — is important since investment income is often the primary source of profits for an insurance company.
What are good financial stocks for beginners?
These are smart choices for beginner investors: 1. Berkshire Hathaway 2. JPMorgan Chase 3. Visa 4. MastercardAs for financial sector exchange-traded funds (ETFs), the Vanguard FinancialsETF (NYSEMKT:VFH) is the best.
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Canadian dividend stocks in the tech space
Here are the current twelve, listed in order of their dividend yield.1. Calian Technologies (TSX:CTY) Dividend Yield: 5.7%Calian, whose roots go back to 1982, when it was a small consulting firm nowemploys nearly 2500 people in offices across Canada. The company, which sellstechnology solutions to governments has grown slowly, but is consistentlyprofitable. In its recently reprted Q2, Calian’s profit rose by 13%, year-over-year, to $3.7-million, on a topline that rose 4%, to $61.6-million.Revenue was up by 4% year-over-year, at $61.6 million from $59.4 million2. Evertz Technologies (TSX:ET) Dividend Yield: 4.3%Dieter Evertz founded his eponymous company in 1966, before selling to a groupthat included current bosses Romolo Margarelli and Doug DeBruin, who came overfrom Leitch Technologies. The company went public in 2006, raising $67 millionin a TSX IPO. Evertz remains as one of the last public companies standing froma once robust Canadian broadcasting technology sector. The company’s fiscal2012 revenue of $293.4-million came from a product line that includes timecodeequipment, closed captioning technology and multiviewers. Evertz’s productshave been used in the production of Star Wars III, Rocky 6, CSI, Oprah and the2008 Olympics.3. Aastra Technologies (TSX:AAH) Dividend Yield: 3.9%Concord, Ontario based Aastra, which markets a range of telephony solutionsfor large businesses, has a surprisingly exciting stock chart for a businessthat seems inherently low beta. The company hit a high of more than $36 in2010 before retreating to under $14 in 2011 on European exposure concerns.Most of 2012 was stable for Aastra, which is consistently profitable androutinely delivers its success back to shareholders in the form of sharebuybacks and ever-increasing dividends.4. Wi-LAN (TSX:WIN) Dividend Yield: 3.7%Ottawa’s Wi-LAN has quietly become one of the world’s top patent acquirers,its pace is now on par or better than Apple, Google and Samsung. The companyis now no stranger to patent infringement claims, having launched actionsagainst dozens of multinationals, including Apple, Hewlett-Packard, Intel,Sony and Toshiba. Calculating the number of patents the company holds hasbecome something of a moving target, because they keep adding more._________________This story is brought to you by Serenic (TSXV:SER). Serenic’s cash position asof its most recently reported quarter was greater than its market cap as ofMay 29th, which was $3.41-million. The company has zero long-term debt. Clickhere for more info.__________________5. C-Com Satellite (TSXV:CMI) Dividend Yield: 3.3%The lone TSX Venture listed company on the list, Ottawa’s C-Com Satelliteprovides satellite-based Internet access equipment.6. Computer Modelling Group (TSX:CMG) Dividend Yield: 3.1%Computer Modelling Group is an Alberta technology success story. In 1978, thecompany was a small Calgary based research facility, and was actually a non-profit entity for the first seventeen years of its existence. When CMG decidedto go for a profit, they were pretty good at it and continue to be; thecompany has more than doubled its revenue from $23.7 million in fiscal 2007 tomore nearly $61 million in 2012. Today, CMG has five offices around the world,and is more likely to make a sale of its leading edge reservoir simulationsoftware outside of Canada than here at home. The scope of CMG’s market hasgrown because reservoir simulation software has become an important tool foroil and gas companies. Computer models allow them to better predict theexpected production, allowing for more better financial decisions.7. Constellation Software (TSX:CSU) Dividend Yield: 2.8%Toronto-based Constellation was formed by current CEO Mark Leonard, who leftthe world of venture capital in 1995 to form the company, which has sincebecome one of Canada’s most successful. Constellation, which makes softwarefor the public and private sector, grows through acquisition, looking toacquire best of breed companies across different verticals. Constellation isinvolved in various niches on the public and private side from software forhousing authorities, transportation agencies, and software for large homebuilders. Constellation, which has acquired nearly two-dozen companies sincethe beginning of 2011, has grown its revenue from just $243 million in fiscal2007 to more than $773-million in 2011. Cantor Fitzgerald analyst Tom Listonsays Constellation’s management is among the very best allocators of capitalin the technology sector.7. Absolute Software (TSX:ABT) Dividend Yield: 2.8%Absolute Software sprung to attention midway through the last decade. In 2005,the company teamed up with Lojack to introduce Lojack for Laptops. Theproduct, which worked by periodically dialing Absolute servers and could notbe disabled even by wiping the hard drive, was a new level of security forlaptops which were, increasingly, becoming a target for thieves.The success of Lojack for Laptops was a boon to Absolute Software. Thecompany’s revenue climbed from under $37 million in 2007 to more than$74-million in fiscal 2012. Along the way, Absolute made OEM deals with Acer,Dell, Fujitsu, Samsung, Toshiba, Intel and HP. Today, the bulk of the moneythe company makes is through these deals, but recent moves have the companymoving aggressively into the mobile device market.9. Macdonald Dettwiler (TSX:MDA) Dividend Yield: 2.0%On June 27th of last year, Macdonald Dettwiler announced it would pay (US)$875-million plus cash dividends and other payments from Space Systems/Loral,which the company expected to be in excess of (US) $135-million. DanFriedmann, MDA’s president and CEO said the transaction, which essentiallydoubled the size of his company, was “game changing”. The Richmond, BCcompany, which was formed in 1969, was a pairing of the efforts of JohnMacDonald and Werner Dettwiler. Since then, MDA has been a part of the fabricof Canadian technology. The aerospace giant’s contribution to the Canadarm, arobotic space arm developed in the 1970′s to repair and service NASA spaceshuttles, is iconic. But the company has since been forced on the rocky roadof reinvention. MDA’s very recent activities will be more familiar for thosewho had followed the company in its halcyon days. The company is the primecontractor for a spectrometer geology instrument called APXS, which allowsNASA’s Curiosity rover to calculate the chemical composition of the rocks andsoil on Mars.9. Mediagrif Interactive: (TSX:MDF) Dividend Yield: 2.0%Founded in 1996, Longueuil, Quebec-based Mediagrif offers a range ofe-commerce services through B2B platforms such as The Broker Forum, PowerSource Online, and Carrus Technologies. The company became increasinglyprofitable as it grew its revenue from $47.9-million in 2009 to $53.8-millionin 2012. In its recent Q3, Mediagrif earned $3.47-million on revenue of$15.1-million.11. Open Text (TSX:OTC) Dividend Yield: 1.6%Open Text, which last year joined Waterloo peer Research in Motion insurpassing a billion dollars in revenue, has managed to remain profitable. Thecompany, which sells software that enables companies to manage their content,has various product offerings that exist under a parade of acronyms thatrelate to the way companies use their content to collaborate and engageclients and meet regulatory requirements. These include Enterprise ContentManagement (ECM), Enterprise Information Management (EIM), Customer ExperienceManagement (CEM) and Business Process Management (BPM). Open Text now has morethan 5000 employees in 31 countries.12. Enghouse Systems (TSX:ESL) Dividend Yield: 1.4%Telecom solutions provider Enghouse has been around since 1984, but appears tonow be hitting its stride; shares of the company have been rising for thebetter part of two years. Markham based Enghouse provides software solutionsfor the most complex of call centers, managing customer interactions forbanks, utilities and insurance companies. The Company has never been a marketdarling, but its fiscal performance have the stock at decade highs. TheCompany has grown its revenue from $55 million in fiscal 2007 to more than$136 million in 2012.The Complete List Of All 331 Dividend-Paying Technology StocksSpreadsheet data updated dailyThe technology industry is one of the most exciting areas of the stock market,known for its rapid growth and propensity to create rapid and life-changingwealth for early investors.Until recently, the technology was not known for being a source of high-quality dividend investment ideas. This is no longer the case. Today, many ofthe most appealing dividend stocks come from this enticing sector.With that in mind, we’ve compiled a list of all ~330 dividend-payingtechnology stocks complete with important investing metrics, which you canaccess below:Keep reading this article to learn more about the benefits of investing individend-paying technology stocks. In addition to providing a full spreadsheetof tech stocks and how to use the spreadsheet, we give our top 10-ranked techstocks today in terms of 5-year expected annual returns.
How To Use The Technology Stocks List To Find Dividend Investment Ideas
Having an Excel document containing the names, tickers, and financial metricsfor all dividend-paying technology stocks can be extremely powerful.The document becomes significantly more powerful if the user has a workingknowledge of Microsoft Excel.With that in mind, this section will show you how to implement two actionableinvesting screens to the technology stocks list. The first screen that we’llimplement is for stocks with dividend yields above 3%.
Screen 1: High Dividend Yield Technology Stocks
Step 1: Download the technology stocks list at the link above.Step 2: Click on the filter icon at the top of the dividend yield column, asshown below.Step 3: Change the filter setting to “Greater Than” and input 0.03 into thefield beside it, as shown below.The remaining stocks in this spreadsheet are dividend-paying technology stockswith dividend yields above 3%, which provide a basket of securities thatshould appeal to retirees and other income-oriented investors.The next section will show you how to simultaneously screen for stocks withprice-to-earnings ratios below 20 and market capitalizations above $10billion.
Why Invest In The Technology Sector?
The technology industry is known for having some of the best-performing stocksover short periods of time. Indeed, it’s hard to overstate how much wealth wascreated for the early investors in companies like Facebook (FB), Microsoft(MSFT), or Apple (AAPL).In addition, the technology sector is highly diversified. It includeseverything from social media companies to semiconductor stocks. The technologysector itself is not a monolith; there are many types of businesses within thesector.Unfortunately, the technology industry is also known for causing one of themost dramatic stock market bubbles on record. The 2000-2001 dot-com bubbledestroyed billions of dollars of market value because technology stocks weretrading at such irrationally high valuations.Source: YChartsThis notable bear market might lead some investors to avoid the technologysector entirely.Fortunately, today’s technology sector is tremendously different from itspredecessor in the early 2000s. While technology stocks were previously valuedbased on page views or other vanity metrics, this school of thought haschanged significantly. Today’s technology stocks are valued based on the sameyardsticks as other businesses: earnings, free cash flow, and, to a lesserextent, assets. Moreover, careful security analysis allows investors to findundervalued technology stocks and profits, just as with any other industry.Investors might also avoid tech stocks because of a perceived inability tounderstand how they make money. Indeed, while many investors – most notably,Warren Buffett – ignore technology stocks because of their harder-to-understand business models, it’s important to note that not all technologystocks have business operations that are shrouded in complexity.As an example, Apple has a very simple business model. The companymanufactures and sells iPhones, Apple computers, and wearable devices.Moreover, one could argue that Apple’s greatest strength is not itstechnology, but its brand – similar to many non-technology companies like theCoca-Cola Company (KO), Procter & Gamble (PG), and Colgate-Palmolive (CL).Importantly, there are opportunities similar to Apple throughout the sector –not all technology stocks have competitive advantages that are based onmicrochip capacity or cloud computing speed.The last reason why technology stocks can play an important role in yourinvestment portfolio is that they have the potential to be very strongdividend stocks. Historically, the technology sector was devoid of anyappealing dividend investments because technology firms reinvested all moneyto drive rapid organic growth. This is no longer the case, at least not ingeneral. Many technology firms now pay steadily rising dividends year in andyear out.As an example, this article from CNBC describes how information technologycompanies have been the largest contributor to historical dividend growth overthe last several years. Moreover, there are plenty of individual technologycompanies with very strong dividend growth rates. Two examples are: * Apple: 10.7% 5-year dividend growth rate * Microsoft: 12.8% 5-year dividend growth rateThe profits of these large, stable technology companies are only growing. And,many technology firms have fairly low payout ratios. These factors lead us tobelieve that the technology sector will continue to provide strong dividendgrowth investment opportunities for the foreseeable future.
Top-performing tech stock
Did you know about a little-known TSX-listed technology company thatoutperformed the likes of Apple (NASDAQ:AAPL) and Microsoft (TSX:MSFT) overthe past decade? Enghouse Systems (TSX:ENGH) is one of the top-performing techstocks on the TSX Index.A $10,000 investment in the company 10-years ago would be worth approximately$123,000 today. Enghouse’s share price is up by 1,140% over this time frame.Not bad for a little-known technology company.Enghouse’s outperformance should not be surprising. This enterprise managementsoftware company is expected to grow earnings at a 17% clip, which isconsistent with its five-year historical average. In 2020, Enghouse is up by9%, far outperforming the 16% loss posted by the S&P/TSX Composite Index.At 13 years, Enghouse owns the longest dividend growth streak among all toptech stocks. It also sports the highest average dividend growth rate. In 2019,the company raised the dividend by 22%.The payout ratio is only 40%, and combined with expected growth rates,investors can expect double-digit dividend growth for years to come.
A dividend at risk?
Just because a company is an Aristocrat, however, it doesn’t mean the dividendis safe. There have already been several Canadian Dividend Aristocrats toannounce a cut, and more are likely on the way. Tecsys (TSX:TCS) is one toptech stock showing signs of weakness.This supply chain management company has done quite well for investors.Although it’s down 6% year to date, the stock price is up by 97.82% over thepast five years.Unfortunately, the company’s earnings growth has been spotty. In 2018 and2019, earnings growth has been negative, leading to an unsustainable payoutratio. As of writing, the dividend accounts for 153% of earnings.On the bright side, it drops to 75% based on next year’s earnings. Given thatdemand for its supply chain products should be strong in this environment, thecompany should be well positioned to maintain the dividend. Is it the safestof the group? No, but a dividend cut doesn’t appear imminent.