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5 Best Tech Stocks to Buy for the Dividends

These tech stocks won't soar like other tech sector plays, but they make for great dividend stocks...

Finding the best tech stocks to buy can be hard in any market, considering the fast-moving nature of the technology sector.

But it’s especially hard for income-oriented investors, given that many of the best tech stocks out there are high-growth companies plowing money into expansion instead of dividends.

If you’re looking for good dividend stocks in the technology sector, then it’s important to acknowledge that these names are naturally not the same as the sexiest small-cap tech stocks out there. Most of these players are older and more mature technology companies, with the largest part of their growth behind them. That maturity isn’t a bad thing, though — just like the dividend stocks among consumer staples stocks or utility stocks, a mature and stable company is frequently the best source of dividends.

Just don’t expect 100% earnings growth each quarter.

If you’re willing to accept a more modest rate of growth in your tech stocks in exchange for big dividends, here are five of the best tech stocks to buy for income right now.

Garmin (GRMN)

Dividend yield: 3.4%

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Yes, that Garmin (GRMN). While GPS sales aren’t going like gangbusters thanks to the rise of smartphone navigation programs, this firm does much more than those suction cup-mounted gadgets for your car.

Garmin is involved in both airplane and marine navigation systems, as well as in-dash systems supplied to automakers ranging from lower-end Suzukis to luxury vehicles from Mercedes-Benz. There is also a big push into trucking and logistic GPS technology.

At the same time, GRMN is seeking out new applications for its technology that include pet location technology for lost dogs, fitness apps for runners, back-up cameras for vehicles and dash cams to help record what goes on in front of drivers to protect police or commercial drivers from liability issues.

This diverse product catalog has allowed Garmin to tack on 60% gains in the last 12 months on optimism about its future.

Sales have admittedly been a bit flat, but the company continues to book earnings growth thanks to better margin products and a $300 million stock buyback plan last year.

As for dividends, Garmin pays 48 cents quarterly which is good for a 3.4% yield. GRMN had about $1.2 billion in cash on the books at the end of June — enough to pay more than three years’ worth of dividends without dipping into a penny of cash flows. For a high-yield dividend stock, that’s a good place to be.

Between upside in share price and a juicy dividend, there’s a lot to like about Garmin over other tech stocks right now.

Seagate Technology (STX)

Dividend Yield: 2.9%

Hard drive maker Seagate Technology (STX), which has soared roughly 50% in the last 12 months. This alone should prove that the hardware company isn’t as dead as some had thought a few years ago when all that hype about a “post PC” age was front and center.

It’s fair to point out that Seagate did stop paying its dividend during the 2008-09 downturn … and waited until 2011 to reinstate it. It’s also fair to say that Seagate isn’t much of a player in smartphone and tablet storage, which is a risk.

However, the rise of mobile has also resulted in a rise of memory storage “in the cloud” — which means brisk business for Seagate servers and cloud storage drives. After all, the stuff that isn’t on your smartphone has to be stored somewhere.

As a result, revenue has remained very firm in the last few years — even after this big run in share price, STX has a forward price-to-earnings ratio of about 10 right now.

And the refreshed Seagate dividend is now 43 cents per share quarterly — more than four times the 10 cents per share it was paying in early 2008. The nearly-3% yield makes it comparable to other dividend stocks, even outside of the tech sector.

That dividend still looks solid, too — at just 30% of next year’s earnings. That could portend even more dividend growth for Seagate.

Tech Stocks: Microsoft (MSFT)

Dividend yield: 2.5%

Microsoft (MSFT) has been on a tear in the last year or so since it announced a massive reorganization in 2013. Shares are up 20% year-to-date in 2014, and up 70% since January 2013.

The momentum has largely been the result of optimism about recent changes, including the departure of longtime CEO Steve Ballmer and the announcement that MSFT will lay off 18,000 employees over the next year. Microsoft clearly needs to grow and adapt in a mobile age, and these moves are signs the company is willing to make tough choices in order to move forward.

The future of mobile is, of course, anyone’s guess. And the Microsoft Surface and Windows Phone lines still have a long way to go before they are leaders in this highly competitive space.

But investors are willing to give Microsoft the benefit of the doubt considering its enterprise software experience and its massive $100 billion in cash and investments laying around.

Even if MSFT stock can’t keep up this pace of appreciation in the years ahead, the good news is that its payouts are highly sustainable and growing at a good clip; the 28-cent quarterly dividend is more than 150% higher than the 11-cent dividend Microsoft was paying back in 2008.

Throw in the fact that Microsoft still has a reasonable forward P/E of about 14, and it seems unlikely that you’ll be faced with a big crash anytime soon in this tech giant.

Intel (INTC)

Dividend yield: 2.6%

Intel (INTC) is another one of those dividend stocks that most investors have left for dead as a relic of the past. And considering the meager returns from the mid-2000s to the end of 2013, that perception would seem justified.

However, INTC stock has won over a lot of investors lately with a big 32% run in the last three months.

Part of that optimism is thanks to a hot new line of mobile chips known as Broadwell, which could put other tech stocks on notice. But even if you don’t believe in the potential of Intel’s latest chip line, it’s important to remember that this company is far from doomed if Broadwell doesn’t catch on.

INTC boasts operating cash flow of more than $20 billion annually, with roughly another $30 billion in cash and investments in the bank. That kind of cash tends to keep dividend stocks like INTC running, and ensures it will stick around to be a big player in the semiconductor space for years to come.

And beyond the share appreciation and growth prospects, there’s a hefty 2.6% dividend yield and a history of substantial increases that could mean big dividend growth to come in the years ahead. After all, in 2004 INTC paid a mere 4 cents per share quarterly and now pays more than five times that amount in a 22.5-cent quarterly dividend.

Cisco (CSCO)

Dividend yield: 3.1%

Cisco (CSCO) stock admittedly hasn’t been very impressive over the last few years based on share price alone. The stock is up just 21% in the last five years vs. March 2009 lows vs. 113% for the S&P 500 index.

But for long-term dividend investors, CSCO could hold serious potential as a value play — especially at current pricing. Cisco yields 3.5% in dividends, which is on par with consumer staples dividend stocks, including Coca-Cola (KO) or Procter & Gamble (PG).

Cisco doesn’t have a long dividend history, but it initiated a dividend in 2011 at 6 cents per share quarterly, and it has already tripled that to 19 cents. Furthermore, even after this steep increase, the dividend payout ratio is about 35% of projected FY2015 earnings. That’s easily sustainable, and even ripe for future increases in dividends.

Sure, the most recent Cisco earnings did rattle some folks with news of layoffs, and flat revenue — not a good sign for a company that has struggled with its top line and profits previously. But investors have heard this story many times before, so the narrative isn’t new, and don’t forget that CSCO actually topped expectations in earnings in the details.

With a forward price-to-earnings ratio of just under 11 and a hefty $45 billion in the bank, Cisco seems to be a fair value at current pricing. Long-term investors who want to play the tech sector with solid dividend stocks could do worse than Cisco.