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The Income Investor

August, 2016 Archives

Technology Income Plays: Undervalued and Outperforming

By Dr. Carla Pasternak


They're called "bond-proxy" stocks because of their attractive dividend yield secured by an abundance of predictable cash flow and cash reserves. This select group of stocks has delivered double the returns of the S&P 500 in the past three months, but are still attractively priced relative to their large cap peers. The group is trading at a trailing price-to-earnings (PE) of just 16; in contrast the S&P 500 is trading at a trailing PE of 25. This discount is all the more compelling considering this group carries an average dividend yield of 3.5%, far more generous than the average 2.1% of large cap dividend payers in the S&P 500.