The technology sector has been the top-performing market sector during the bull market by a wide margin. Unfortunately for dividend investors, many of the top-performing tech stocks pay small dividends or no dividends at all. Silicon Valley is not known for its dividend payouts, but there are plenty of popular tech stocks that reward their shareholders with high yields. Investors don’t necessarily have to choose between playing offense by investing in the high-growth tech sector or playing defense with high-yield investments. Here are seven of the best tech stocks to buy with dividend yields of at least 2.8%.
Broadcom is one of the most profitable companies within the semiconductor group. Broadcom may not put up the same growth numbers as high-flying tech stocks like Netflix (NFLX) or Amazon.com (AMZN), but it reported a respectable 8.6% revenue growth in the first quarter. Bank of America analyst Vivek Arya says Broadcom has diversified market exposure to some of the highest-growth secular trends in tech, including mobile devices, cloud data centers and enterprise storage. Broadcom has a 3.3% dividend yield. Bank of America has a “buy” rating and $325 price target for AVGO stock.
Patient investors willing to make a bet that IBM can finally turn the corner in modernizing its business after years of struggles and underperformance will get paid a 4.5% dividend while they wait. Analyst Wamsi Mohan says IBM is one of the best defensive stocks in the tech sector, given its recurring revenue, cost-cutting opportunities, stable margins and robust balance sheet. Mohan says IBM will also eventually gain share in the high-growth cloud and artificial intelligence markets. Bank of America has a “buy” rating and $165 price target for IBM stock.
Lenovo is the largest PC maker in the world, with 18% total market share. In China, Lenovo is even more dominant, capturing about 30% of the PC market. In the most recent quarter, global PC sales were down 3% from a year ago, according to Gartner, a global research and advisory firm. However, the Wall Street Journal reported that Lenovo wasn’t impacted as much as other vendors. Lenovo reported 8.4% revenue growth in the first quarter of 2019. The stock pays a 3.7% dividend yield. Bank of America has a “buy” rating and $15.05 price target for LNVGY stock.
Nokia was once the world’s largest mobile phone vendor and remains a major patent licensor to most of today’s top mobile device vendors. After struggling for several years, Nokia management finally gave shareholders something to like last quarter. Nokia said recurring free cash flow will be “slightly positive” in 2019 and “clearly positive” in 2020. In addition, management said the company will return at least 40% of its earnings to shareholders via dividends. Nokia’s current dividend yield is 4.1%. Bank of America has a “buy” rating and $7.50 price target for NOK stock, which trades on the Helsinki stock exchange.
Silicon Motion Technology
Silicon Motion Technology is a semiconductor stock with a focus on the NAND flash memory market. Analyst Simon Woo says the company is well-positioned to benefit from a weak NAND pricing environment. The stock’s low earnings multiple and aggressive capital return should also benefit long-term shareholders, Woo says. Silicon Motion has growth opportunities in the solid-state drive market, and Woo says earnings will start to recover in the second half of 2019. Silicon Motion has a 3% dividend yield. Bank of America has a “buy” rating and $48 price target for SIMO stock.
Taiwan Semiconductor Manufacturing Co.
U.S. investors are familiar with top American semiconductor stocks such as Qualcomm (QCOM) and Nvidia Corp. (NVDA). However, Taiwan Semiconductor is the world’s largest integrated circuit producer, and Qualcomm and Nvidia are both among its customers. Analyst Robin Cheng says demand from secular growth trends in mobile devices, artificial intelligence and "internet of things" should drive sustainable demand for Taiwan Semicon. Cheng is forecasting double-digit, long-term revenue growth and rising dividends. TSM currently has a 2.3% dividend yield. Bank of America has a “buy” rating and $260 price target for TSM stock.
Western Digital Corp.
Long-time tech investors may know Western Digital as a hard disk drive producer, but the company is shifting its business to more sustainable markets, including solid state drives and storage systems. Mohan says Western Digital is gaining market share in the enterprise HDD market and has been a beneficiary of a tight NAND market that persisted through the first half of 2018. Mohan says Western Digital shares are cheap at a 10.2 forward earnings multiple. Western Digital has a 3.7% dividend yield. Bank of America has a “buy” rating and $55 price target for WDC stock.