Name: Here's What Tech Companies May Do With Dividends in 2017
Uploaded: 2016-11-30
Duration: 4 min 59 s
Description: According to our panel of investor experts.

[ NOISE ] [ BLANK_AUDIO ] Dan, when I started covering investing there was virtually no big tech company that paid dividends to their shareholders. And you've obviously seen recently, not that recently anymore, some changes in that. I mean, Microsoft pays a dividend now, Apple pays a dividend. You've got a lot of big question rotating around how the tech companies are gonna use these big piles of cash that they're sitting on? How can they best deploy them to use? Part of that could involve giving more money back to shareholders with more buy backs and things like that. But that's not the only answer I assume. But how are you seeing that conversation about what to do with that Those cash piles playing out. These are cash generating companies. I mean, the business model for a software company, we are talking about 80 % gross margins. In the early days Microsoft, 35 % profit margins. Not the same today, but they're still unique in their business models. And if they're good companies, they're gonna generate cash. Harder to see through some of the business models in the Way revenue is recognized in a subscription based revenue environment. But they still are enormously profitable in cash generating. Most of these companies grow through acquisitions. And we've seen the acquisitions get bigger. It used to be these companies were too young to buy big companies. Microsoft didn't buy a LinkedIn for $ 25 billion $ 26 billion But more of that's gonna happen. I think we'll see some really unusual pairing to when we talk about more and more companies becoming digital, and who people acquire We've certainly seen this in Verizon, AOL and that combo there. So there will be a lot of pairings going on, especially if money comes back here I think it will accelerate the M & A market. The companies also have enormous R & D budgets. There is no national R & D anymore, per se. So we are the R & D arms of The world and that is exonerating. We see the innovation curves that have happened, cloud, the data, now intelligence, those are exonerating. So people are hiring more people. You see companies like Amazon, where we've got 300, 000 employees now, no one thought of companies having that many employees being called at Tech companies. So they have a bigger footprint They also have, need some insurance money for risks themselves for this volatility which we're talking about. So again, I don't think these companies will ever be able to spend all of their cash, which is why they been pressured to issue dividends. But it will create more MNA, more expenditures on our RND in an accelerating innovation market. And some pretty unusual combinations, I think in the M & A transactions. Yeah. Those are companies that grow through innovation, through disruption, as opposed to being to sensitive to overall economic growth. Mm- hm. Like financials and energies stocks. And I will also point out, because I think many of the leaders might not be aware of this. The bulk of these great technology companies are listed in the US market ,- Mm- hm. Which is what distinguishes global investing, where the US is included in the portfolio ,- Sure. Versus the international, where it's excluded, cuz the international indices have a mere 4 or 5 % in technology. A lot of these great companies are located Here. That's right. I would say that there are plenty or really good take companies overseas just as much. It's not just limited to the US, so. But they are not in the indexes. [ CROSSTALK ] So, you have companies in China that you could buy a ten sense, a sea trip. You have take companies in India that you can buy. That are growing at a pretty rapid clip. So I think the days of technology being just a US enterprise, I think that's not true. In size, technology may be a larger footprint in the US, and it's definitely more established, but the growth projectory of technology In other countries may actually may be hire, than what it is in the US. In fact the number of billion dollars in many access, exits the greatest number foreign stock home, in a last 2 years. I agree with you on in the combination are interesting emphasis just invested one of our YoungStartapps That was not a common investment. Chinese companies are buying tons of small American companies, that you don't even see those transaction happening, as well as investing in them. Global cross border investment is very, very substantial, especially from corporate entities having investing arms.

According to our panel of investor experts.