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What are we looking for?

Sustainable dividends from cybersecurity tech stocks.

The screen

Cybersecurity is back in the spotlight after a customer data breach at Saks Fifth Avenue and Lord & Taylor (owned by parent company Hudson’s Bay Co.). Cambridge Analytica’s use of data from 87 million Facebook Inc. accounts has kept that social-media giant in the headlines.

Still, leaders in cybersecurity, specifically those with above-average earnings prospects, stand to benefit. While most pay small dividends or none at all – they prefer to channel cash flow into high research spending – a select few reward shareholders with sustainable dividends. Those companies also spend a significant amount on research.

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From an extensive list of tech stocks (most having dropped with the recent market downturn) we identified leading cybersecurity firms that pay dividends. We then applied our TSI Dividend Sustainability Rating System to those stocks. It awards points to a stock based on key factors:

  • One point for five years of continuous dividend payments – two points for more than five;
  • Two points if it has raised the dividend payment in the past five years;
  • One point for management’s commitment to dividends;
  • One point for operating in non-cyclical industries;
  • One point for limited exposure to foreign currency rates and freedom from political interference;
  • Two points for a strong balance sheet, including manageable debt and adequate cash;
  • Two points for a long-term record of positive earnings and cash flow sufficient to cover dividend payments;
  • One point if the company is a leader in its industry.

Companies with 10 to 12 points have the most-secure dividends, or the highest sustainability. Those with seven to nine points have above-average sustainability; average sustainability is four to six points; and below average sustainability, one to three points.

More about TSI Network

TSI Network is the online home of The Successful Investor Inc. – the group of widely followed Canadian investment newsletters by editor and publisher Pat McKeough. They include our award-winning flagship newsletter, The Successful Investor. The TSI Best ETFs for Canadian Investors is the latest. TSI Network is also affiliated with Successful Investor Wealth Management.

What we found

Our TSI Dividend Sustainability Rating System generated six stocks. Symantec Corp. is a global leader in combatting cyberthreats. Networking leaders Cisco Systems Inc. and Juniper Networks Inc. include strong cybersecurity in their products, while a wide range of U.S. federal government agencies, including the Federal Bureau of Investigation, Homeland Security and the Armed Forces, rely on ManTech International Inc.’s software and technical support. Leidos Holdings Inc, offers similar cybersecurity to government, health care and private enterprises. Vancouver’s Absolute Software specializes in data security firms for mobile devices connecting to their networks.

We advise investors to do additional research on any investments we identify here.

Cybersecurity firms with sustainable dividends 

Ranking*CompanyTickerDividend Sustainability RatingPointsMarket cap ($Mil)**Share price $**1Yr Total Return (%) Div. Yield (%)
1Cisco SystemsCSCO-QAbove Average9199,349.041.2023.33.2
2Juniper NetworksJNPR-NAverage58,285.224.15-13.63.0
3Leidos HoldingsLDOS-NAverage59,898.165.7729.72.0
4ManTech InternationalMANT-QAverage52,170.056.5667.71.8
5Symantec Corp.SYMC-QAverage515,961.326.10-13.91.2
6Absolute SoftwareABT-TAverage4274.46.81-9.74.7

Source: Dividend Advisor

*Ranking is determined by TSI Dividend Sustainability Score. Where overall points are the same, analysts considered P/E, dividend yield and industry outlook to decide final placements. **Share price and market cap are in native currency. 

Scott Clayton, MBA, is senior analyst for TSI Network and associate editor of TSI Dividend Advisor.

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