The semiconductor industry is turning around after four quarters of dismal performance and may be attractive for clients seeking a growth sector that also pays higher dividends. Comparisons will be easier going forward because of the non-performance over the previous year so the turnaround may get some legs from easier earnings comparisons.
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A year of weak sales in the industry typically does lead to a strong year following. And some semiconductor companies pay dividends on their stocks—something that may appeal to income-seeking investors.
Many semi-conductor companies are also mid-caps so their dividends do not compete with larger company dividends. Dividend growth in mid-caps is more robust
than in larger cap stocks.
The key is to follow the pace and direction of dividend growth over a period of years.
Some portfolios experienced dividend growth over the five years ended in June 2012 in the double digits. Over that same period, the S&P 500 had dividend growth of about 2%.