Tech Plays for Income-Seekers

03/20/2017 2:50 am EST


Harry Domash

Publisher, DividendDetective and Winning Investing

Harry Domash, editor of Dividend Detective, develops a wide variety of models designed for those seeking income. Here, he looks at two tech ideas that have earned spots in his income portfolios.

We’re adding a new fund to our Closed-End Fund Growth Opportunities portfolio that seemingly does the impossible — it focuses on high-tech stocks.

Tech stock, as you probably know, don’t pay much in the way of dividends. But this closed-end fund manages to pay outsized returns, plus a 9.1% dividend yield.

In my view, tech stocks will outperform over the next few years. But how can we participate when most tech stocks don’t pay significant dividends? That’s why we’re adding Columbia Seligman Premium Technology Growth (STK) to the portfolio.

Instead of collecting dividends, CS Premium Tech employs a strategy that derives income by selling call options on stocks in its portfolio. Of course, it still enjoys capital gains when its stocks go up. Does that work?

The fund, currently paying a 9.1% yield, has returned 30% over the past 12-months, and 22% and 15%, on average, annually, over the past three and five year periods.

Also in technology, we’re adding a new chip maker to High Dividends–High Tech portfolio. It is a player in all of the hot new markets; smart automobiles, factory automation, and Internet of Things.

Hard hit by slowing desktop computer sales, the semiconductor industry has been in the dumps in recent years.

However, three relatively new markets are heating up: 1) smarter cars, 2) factory automation, and 3) Internet of Things, which is a term describing applications such as using your iPhone to turn the lights on.

Our new pick, Maxim Integrated Products (MXIM), is a player in all three of those markets. Any or all of them could turn out to be hot growth sectors.

That could result in Maxim beating analyst forecasts, which of course, is what makes share prices move higher. With a 10% dividend hike last August, Maxim is dividend-investor friendly. It’s paying 3.0%.

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