When it comes to returning capital to shareholders, dividends are generally considered the yardstick showing a company’s belief in sustainable earnings for years into the future. Investors know that dividends in income stocks now account for a large portion of total returns through time. The reminder that the bull market was interrupted ahead of its seventh anniversary is another issue. Investors seem to want the higher quality stocks, or at least those with predictable earnings and with solid dividends.

So what about the companies that could easily pay dividends but simply refuse to do so? 24/7 Wall St. has identified six solid technology companies that are deemed to have a safe earnings floor but that are choosing to use cash in other methods on behalf of their shareholders. These should be considered the dividend sinners, or dividend misers, even if they are great tech giants. This is also not meant to bash a stock’s performance — some have in fact been quite stellar.

The market has pulled back in 2016 and it seems that this is a good time for investors to reflect on which companies are treating their shareholders the best. Investors generally have done well historically by investing in growth and technology, and they have done well by investing in dividend stocks. They can invest in technology and growth and get handsome dividends, now that one-sixth of the Dow Jones Industrial Average is dividend paying tech stocks.

24/7 Wall St. has written about many companies in recent years that needed to start paying a dividend. Some of them have started to do just that, including Amgen, Apple, Cisco, EMC, Gilead, Nasdaq, Teradyne and more. It seems more than likely that the so-called dividend aristocrats, those companies that have hiked their dividends for 25 years in a row, could eventually be full of technology stocks.

In normal investing terms, it seems fitting to call companies that could easily pay a dividend but refuse to do so by the name dividend sinners or misers. As of the start of 2016, there were fewer than 80 members of the S&P 500 that do not pay dividends. It was just two or three years ago that the figure was closer to 100 companies of the S&P 500.

24/7 Wall St. is evaluating technology companies that either should start paying a dividend or that it believes will do so. In order to qualify, each of these tech stocks needs to have had positive earnings per share (EPS) for years, and they cannot have other factors that might have presented a hurdle to being able to afford a dividend in the relatively near future. For instance, a company with a price-to-earnings (P/E) ratio of 100 should not be expected to be a huge dividend payer, even paying out 100% of income would yield only 1%, in theory.

Here are the 2016 dividend sinners (or dividend misers) in the technology sector from 24/7 Wall St. Not only are these established tech stocks, they are all members of the S&P 500 Index.

Adobe Systems

Adobe Systems Inc. (NASDAQ: ADBE) seems to have not gotten the message that most of the highly established tech stocks in the S&P 500 now pay dividends. That being said, Adobe used to pay a tiny dividend and decided to end it in 2005. The administrative effort and cost of a dividend was part of why it stopped, as well as growth opportunities and using cash more efficiently. Now fast forward to 2016, and it may be that Adobe is more concerned with the ongoing transition of its business rather than sending money back via a dividend check to shareholders. Adobe has chosen to repurchase its shares instead, with the 2015 buyback plan being up to another $2 billion after buying back stock in prior years.

With a market value of $43 billion, and with spending money on share buybacks, the real issue is how much Adobe can or would commit to a dividend payment when it is valued at close to 30 times expected earnings. The company is using its $4 billion cash balance to fund buybacks, and Adobe has been an acquirer of companies from time to time in the market. Adobe has been public since the 1980s, and shares blasted off to new all-time and split-adjusted highs in 2013.

Adobe shares were recently trading at $87.04, with a consensus analyst price target of $103.83 and a 52-week trading range of $69.04 to $96.42.

Alphabet

Could Alphabet Inc. (NASDAQ: GOOGL) be on its way to within striking distance of unseating Apple as the most valuable company in the world by market cap? The reality is that the multi-class structure of shares makes that a misnomer because so much of the control is locked away and out of reach.

Google’s morphing into Alphabet also made this company more complicated to some investors, and the reality is that Larry Page and Sergey Brin are truly in control with their own team in place to run the show here. Before thinking that they deserve a bash, we still have to consider that Alphabet/Google shares have risen handily — up about 40% since the end of 2014 alone.

The addition of Ruth Porat as chief financial officer was another move to get the company further along with adult supervision, and some market pundits have speculated that a Google dividend’s time has arrived. The reality is that Alphabet, or whatever you want to call it, has done more than just well for investors, and paying a dividend is solely up to a handful of people.

Investors need to keep in mind a serious issue about Google or Alphabet, above the name identity crisis some of us still have with it. No outside pressure can influence one iota of directional change if Larry and Sergey don’t want something to be done, even with the new business team.

Shares of Alphabet were trading at $735.55, within a 52-week trading range of $503.48 to $798.69. The consensus analyst price target is $860.69.

eBay

On its own after buckling to activist pressure to spin PayPal back out of the company, eBay Inc. (NASDAQ: EBAY) is now a slower growth Internet auction and marketplace services provider than in years past, and the long-term upside for PayPal is no longer for the benefit of eBay. Some have even speculated that Jack Ma of Alibaba could want eBay (good luck on regulatory and eBay customer backing).

There is just one problem in trying to predict that eBay will become a great dividend machine. eBay’s 2014 annual report said that it does not anticipate paying cash dividends in the foreseeable future. That being said, it fought the PayPal breakup call at first too.

On top of holding lots of cash, eBay is valued at a mere 13 times expected 2016 earnings. If growth is slowing and the company already has unlocked value, a dividend just makes sense here. eBay also has been a fairly aggressive buyer of its shares in the past via stock buyback authorizations.

Shares of eBay have been changing hands at $26.49. The consensus analyst target is $30.48. The 52-week range is $22.11 to $29.83.

Electronic Arts

In this past video game console upgrade cycle, Electronic Arts Inc. (NASDAQ: EA) has won handily. Its shares were up above $70, above previous all-time highs seen in 2004 or 2005. They were under $20 less than three years ago. EA has been public since 1989 and has split multiple times, and it looks to have generated over 100-times total return since its initial public offering.

EA’s valuation has remained over 20 times expected earnings, with over $2.5 billion in liquidity and no serious long-term debt. It remains up for debate whether a 1% initial yield would bring in a slew of new investors, but the reality is that it can easily afford close to 70 cents a year, when EPS are forecast to be $3.10 this year and $3.57 next year.

The video game publishing giant announced a $1 billion stock buyback in 2015 after already having bought back more shares previously. Also, rival Activision Blizzard has paid a cash dividend since 2010 and it has grown its payout each year.

EA shares were recently trading at $70.81, with a consensus price target of $82.78 and a 52-week range of $48.22 to $76.92.

Micron Technology

Micron Technology Inc. (NASDAQ: MU) has become a dream stock for value investors. The problem is that it has been a nightmare of a value trap for longer than even the most sophisticated investors would have imagined. Shares had risen handily to over $35 in late 2014, after it acquired Elpida, but Micron shares have fallen and fallen, briefly dipping under $10 in January of 2016.

There may be issues here preventing aggressive dividends, but being valued at less than five times trailing earnings (even if that is 10 times a blended forward earnings estimate) would indicate greater expectations for dividends.

Micron said in its most recent annual report that it has not declared or paid cash dividends since 1996, and that it does not intend to pay cash dividends for the foreseeable future. Another dividend hiccup may be tied to Japanese proceedings and restrictions around MMJ Group. That being said, nothing lasts forever.

Micron’s $5.6 billion cash holdings match up against an expected $5.3 billion to $5.8 billion in planned 2016 capital spending. Micron did authorize a share buyback plan in 2014, and most of the profitable chip stocks now pay solid dividends.

Shares of Micron were trading at $10.65. The consensus price target is $18.15, and the 52-week range is $9.31 to $32.84.

Teradata

After nearly 10 years since its spin-out of NCR, Teradata Corp. (NYSE: TDC) has had a hard time recently growing in storage and data, and its revenue growth now is expected to be in contraction. Still, there may be an earnings floor as investors are expecting over $2.00 in EPS here, despite a drop from 2014.

A big stock drop has taken Teradata down to under $23, from $47 in 2015, but this was a much more grand $70 and $80 stock in 2012. The company has a pretty clean balance sheet, and it already has begun repurchasing its common stock aggressively in 2015.

When the market will not give a technology company a valuation of more than 10 times expected earnings (and with expected cost cuts and gross margins of close to 50%), it may be time to do more than just repurchase shares as a message of earnings confidence. Now think about 10% of operating earnings being used to pay dividends, not much on the surface, but that alone would give close to a 1% yield that has plenty of room to grow. Other storage companies have started paying dividends.

Teradata shares have traded at $22.98, with a consensus price target of $26.23 and a 52-week range of $21.98 to $47.03.

Thank you for reading! Have some feedback for us?
Contact the 24/7 Wall St. editorial team.