Equities in the tech sector usually don’t become popular dividend stocks. Even when they finally introduce payouts, it often only happens after years of pressure from shareholders. These stocks also often retain the interest of shareholders more for their growth potential than the payout. Others such as Google-parent Alphabet (GOOG, GOOGL), resist offering a dividend to this day despite having a cash hoard of over $121 billion.
However, we also see indications that this attitude has shifted. Some of the largest names in tech have become every bit as mainstream as 100-plus-year-old firms such as Coca-Cola (KO) or Johnson & Johnson (JNJ). As they achieve this place in American business, many have begun to both begin paying dividends and building a record of consecutive annual increases.
Over the next few years, many of these companies could gain the “dividend aristocrat” distinction as they meet the 25-year minimum threshold. Investors looking for dividend stocks in the tech sector should consider the following stocks to buy.
Apple (AAPL) teetered near bankruptcy in the late 1990’s. But after the return of Steve Jobs, it went on to offer many products that drive tech today as well as the first $1 trillion market cap. This success brought AAPL stock the largest cash reserve in tech. Consequently, Tim Cook placed Apple on the list of dividend stocks.
The company paid its first quarterly dividend in August 2012. Today, that annual dividend comes to $3.08 per share. While the 1.45% yield may not impress many investors, it has increased the payout every year since dividends began.
AAPL stock has suffered over the last year as it faced a decline in iPhone sales. However, the company has begun to compensate for this with new lines of business, such as Apple TV+ and the Apple Card. As a result, the stock has now recovered most of the losses from last year’s swoon in tech stocks. Moreover, the forward price-to-earnings (P/E) ratio of 15.8 comes in lower than its peers.
AAPL stock is not without risk. The trade war continues, and compensating for falling iPhone sales will not occur overnight. But with its cash hoard and dedication to innovation, AAPL should continue to serve investors well.
Broadcom (AVGO) has become better known for its technology than for its place among dividend stocks. As a semiconductor and infrastructure software company, investors often seem to not focus on its payout.
However, those who own AVGO stock for the long term, currently receive $10.60 per share in cash, a payout of around 3.7%. The company has increased this payout for nine straight years. Moreover, investors will not have to pay much for this source of cash flow. AVGO stock currently trades at less than 11.6 times forward earnings.
In some respects, AVGO has become cheap for a reason. As our own Vince Martin states, succeeding with AVGO stock means placing a great deal of trust in the hands of management. The firm moved away from semiconductors when it bought software company CA Technologies. If rumors prove true, Broadcom could target Symantec (SYMC) next. This would broaden its involvement on the software side.
One the one hand, the pivot into software seems strange at a time when many companies want to focus on fewer business lines. Still, with profit growth set to return to double-digits next year, the dividend for AVGO stock looks set to keep growing.
Former Cisco (CSCO) CEO John Chambers resisted payouts for years, often stating that “acquisitions and investments make better use of cash.”
However, by 2010, cash reserves had continued to grow. At that time, it had held more cash than any other tech company. With the need to recover price growth in the equity following the financial crisis, CSCO stock joined the list of tech dividend stocks in 2011. Today, shareholders receive $1.40 per share. This takes the cash return to about 2.9% at today’s stock price.
This payout has risen every year since the company began paying dividends. Due to the company’s reinvention, it should have no trouble maintaining these increases. CSCO began as the hardware networking company that helped build the internet. Today it has ventured into cloud computing and cybersecurity. They also announced a $5-billion investment into 5G over the next three years.
Today, many companies hold more enormous cash reserves than Cisco. Also, its predicted profit growth of 7.7% will probably not excite many investors. However, they can now buy this income stream for around 13.1 times forward earnings. Once 5G takes off, CSCO stock could see its best years since the heyday of the 1990s tech boom. With a dividend now attached, that growth becomes all the more enticing to investors.
In the 1990s, Intel (INTC) broke from its big-tech peers and introduced a dividend. However, when the company first began its payout in 1997, it did not leave much of an impression on Wall Street. At an annual rate of just 3 cents per share, investors continued to treat INTC stock like a growth equity.
In this area, Intel has awarded patience. Today, the INTC stock dividend now stands at $1.26 per share, a yield of about 2.7%. Moreover, this yield has risen for four consecutive years. Trading at just 10.2 times forward earnings, this could entice a lot of investors.
In many respects, INTC stock has become cheap for a reason. The decline of the PC and turmoil in the C-suite led to several missteps with the company. It fell behind as long-time peers Nvidia (NVDA) and AMD (AMD) took technical leads over the chip giant. It has also suffered as it exits the smartphone modem business and deals with an industry-wide chip glut.
However, rumors indicate Intel may not have fallen as far behind AMD as many had feared. Moreover, the rise of 5G could change Intel’s fortunes. So-called “network cloudification” could again bring Intel to the forefront. If nothing else, this should further payout increases and could make INTC one of the more profitable tech dividend stocks to own.
Like many of its peers during the 1990s tech bubble, Microsoft (MSFT) founder Bill Gates resisted dividends. However, by 2003, Steve Ballmer had taken over as CEO. Moreover, Gates was looking to funnel more cash to the Bill and Melinda Gates Foundation. Both events helped to incentivize a dividend, and MSFT stock made its first payout in 2003. That followed with a special dividend of $3.08 per share in 2004.
Although the company has not paid another such special dividend, it has increased its payout every year since that time. Today, MSFT pays $1.84 per share annually.
The 1.3% return shareholders earn may not excite investors. However, the overall company is at the top of its game under current CEO Satya Nadella. Today, many think of Microsoft more as a cloud leader than a PC-operating system company.
As a result, profits and stock prices keep surging higher. The forward P/E ratio stands at 22.7, and it has again claimed its “world’s largest company” moniker with a market cap exceeding $1 trillion. With $133.82 billion in cash and a AAA credit rating, investors will struggle to find a more secure dividend than that of MSFT stock.
NetApp (NTAP) performs cloud data services and data management. It begun as a storage hardware company called Network Appliance in 1992 and followed both the boom and bust cycles of the 1990s tech bubble. However, the stock has moved steadily higher since after the tech bust. Although it still focuses on storage, it has pivoted more toward the cloud in recent years.
It joined the ranks of tech dividend stocks in 2013, and that payout has increased every year since. Today, the dividend comes to $1.92 per share and delivers just over 3.3% in cash returns. Moreover, while I do not see another 1990s-like boom for NTAP stock, it could soon become a buying opportunity.
NTAP stock lost nearly half of its value over the last year as tech stocks took a hit amid the U.S.-China trade war. However, that massive decline could turn around soon. Analysts predict that a temporary decrease in profits this year will give way to 11.3% earnings growth next year. Furthermore, it trades at a forward P/E ratio of just 10.2.
Investors may want to wait until the NTAP stock price stops falling before buying. However, with a low P/E ratio and a stable dividend that can maintain its growth amid an industry slowdown, investors will likely place NTAP on their stocks to buy list soon.
In recent years, Qualcomm (QCOM) has garnered more attention for court battles and mergers than for smartphone chips. The rise of 5G could help to turn QCOM stock around. However, traders often forget that amid the turmoil with lawsuits, Qualcomm has quietly made itself one of the more compelling dividend stocks in tech.
Its annual payout of $2.48 per share gives investors a cash return of almost 3.5%. It has also increased this dividend for eight consecutive years. The payout kept rising even as QCOM stock suffered from lawsuits and threats by companies to go elsewhere.
Qualcomm still faces court battles, but it recently won a reprieve against the FTC’s antitrust probe of the company. Moreover, QCOM profits should move higher as consumers will soon upgrade their phones to 5G.
Given these conditions, one can easily understand why analysts predict a 21.3% increase in profits next year. Similar increases should follow in subsequent years. Despite this likely rise in earnings, investors can buy QCOM for just 17.6 times forward earnings.
QCOM has suffered in recent years amid lawsuits and antitrust challenges. But with 5G coming soon, QCOM should deliver not only on price growth but also as a high-paying dividend stock.
|For more news you can use to help guide your financial life, visit our Insights page.|