Yesterday, I asked my readers a question: What should Apple do with all its extra cash? I made the argument that the company should invest in new products and do whatever it can to expand its business (including acquire other companies) and solidify itself as an even more important company in the industry.
But after reading through the comments, it became abundantly clear that some readers thought I should have included a payout back to investors in the form of dividends. After seeing that, I decided a follow-up column on that topic was in order to fully explain why many companies in the technology industry are loath to offer dividends to investors.
Sure, technology stocks may be a great place for investors to diversify their portfolios or maybe even get rich with the help of stocks like Apple and Google that keep performing extremely well. But for those that are looking for steady income from their shares in the form of dividends, the technology sector is a bad place to start.
The reason why is quite simple: most of the companies in the tech sector are obsessed with growth and need to manage huge research and development budgets. And because few competitors boast residual dividend policies, few companies feel the need to fork over cash to investors for their support.
And unfortunately, there's no sign of that trend changing.… Read more