Dividends from Technology Companies: Analysis of Main Drivers of Potential Growth

This paper examines the key factors for technology companies, listed on NASDAQ, NYSE, and AMEX, that have the positive influence on managers decision to pay dividends. The choice of industry, that includes Computer Software, EDP Services, Semiconductors and other subsectors, is determined by its importance as one of the key areas that drive the dividend market. The research is performed by logistic regression, tobit regression and decision tree. The sample consists of 191 companies and includes the data collected for the 10-year period from 2008 to 2017. This study considers the impact of ten variables on the dividend payout probability and future dividend growth: firm profitability, leverage, investment attractiveness, investment opportunities, size, growth opportunity, risk, life-cycle stage, age and previous year’s dividend payout. The article presents the following empirical results for technology companies: firms who pay dividends more likely to continue doing it in the next period; firms profitability, her age and the stage of life-cycle are the most significant factors defining its dividend policy. Excluding the previous year’s dividend payout, the most influential attribute to determine the dividend payout company is the stage of life-cycle. Also, in the course of the study, none of the constructed models identified a significant link between the company's investment opportunities and dividends paid. The results received during the research are rather new and can be interesting to the managing directors of the companies, for analysts and investors who are ready to invest their money into the technological sector. They will help to derive a clear picture of events that covered market of technologies and to understand the firm’s willingness to pay dividends. Moreover, the obtained decision tree shows the simple plot of the key factors on what investors should pay attention if they are interested in dividends.