Seeking dividends in the realm of technology stocks has often been akin to searching for a needle in a haystack.
Tech giants have historically shied away from distributing profits, opting to plow earnings back into fueling growth. The legacy of Apple’s visionary Steve Jobs, who staunchly resisted paying dividends, seemed to set a precedent for his tech peers. However, winds of change are beginning to blow.
Recently, behemoths like Meta Platforms and Alphabet bucked tradition by declaring dividends for the first time, shaking the core of the tech industry. This bold move has cast a spotlight on other major players like Amazon and Tesla, intensifying calls for them to follow suit, although no definitive signs have emerged indicating an imminent dividend payout.
If you’re an income-oriented investor with a penchant for tech stocks, the landscape offers promising opportunities. Let’s delve into three tech titans that not only pay dividends but are primed for growth in the volatile tech sector.
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The Steadfast Microsoft
Microsoft, while boasting a modest dividend yield of 0.7%, stands out as a stalwart dividend payer in the tech sector.
The tech juggernaut initiated dividend payments in 2003 and has consistently raised them by a minimum of 10% almost annually. Anchored by robust competitive advantages, Microsoft appears poised to sustain its dividend growth trajectory for years to come, possibly even decades.
Holding the mantle as the world’s most valuable company with a market cap surpassing $3 trillion, Microsoft commands leading positions across various sectors, from enterprise software exemplified by its Office suite to cloud computing where Azure vies with Amazon Web Services.
Securing a rare AAA credit rating from Standard & Poor’s, Microsoft has cemented its status as an AI frontrunner, forging a tight alliance with OpenAI. With such formidable strengths, Microsoft presents a compelling case for long-term dividend growth.
The Resilient Taiwan Semiconductor
For dividend seekers within the tech arena, the semiconductor industry emerges as a treasure trove, and Taiwan Semiconductor reigns as a prime jewel.
Holding sway as the globe’s largest contract-chip manufacturer with a lion’s share of approximately 60% of the third-party chip market, Taiwan Semiconductor serves an illustrious clientele including tech powerhouses like Apple, Nvidia, Broadcom, and Advanced Micro Devices.
Boasting robust profitability with operating margins hovering around 40%, Taiwan Semiconductor’s market cap of $800 billion underscores its colossal stature. Presently proffering a dividend yield of 1.4%, the company is committed to disbursing sustainable and escalating dividends.
Mirroring Microsoft’s trajectory, Taiwan Semiconductor stands ripe to reap the rewards of the emergent generative AI landscape, a realm where top chip designers like Nvidia rely heavily on its offerings.
The Dynamic Oracle
Completing the trio of tech dividend stocks warranting investment consideration is Oracle, despite being overshadowed by the nimble-footed entrants in the sector.
Known for its database-management system and the Java programming language, Oracle is currently witnessing a surge in demand for novel data centers and its cloud-infrastructure solutions, propelled by the upsurge in generative AI. Forge partnerships with industry stalwarts Microsoft and Nvidia fuel Oracle’s growth trajectory.
In its latest financial quarter, cloud-infrastructure revenue soared by 49% to hit $1.8 billion, signaling robust momentum. Notably, the company’s backlog, indicative of outstanding commitments, surged by 29% to a staggering $80 billion, illustrating burgeoning demand.
Presently yielding 1.3%, Oracle has displayed a commendable track record of beefing up dividends since its inception in 2009. Fueled by its expanding data-center footprint, the rise of generative AI, and symbiotic partnerships with Microsoft and Nvidia, Oracle emerges as a compelling dividend-play for tech investors seeking longevity.
The Question of Investment in Microsoft
Before diving into Microsoft stock, prudent investors should weigh various factors.
The Motley Fool Stock Advisor team recently unveiled their selection of what they deem as the top 10 stocks for investors to focus on; to the surprise of many, Microsoft was not among the chosen few. However, the 10 stocks identified hold the promise of delivering substantial returns in the foreseeable future.
Reflect on the extraordinary growth trajectory of Nvidia, which featured on a similar list back in April 2005. A $1,000 investment at the time would have burgeoned to an impressive $671,728, underscoring the transformative potential inherent in prudent stock selection.
The Stock Advisor service, known for offering a roadmap to investment success replete with portfolio-building guidance and regular analyst updates, has eclipsed the S&P 500 return by over fourfold since its inception in 2002.
*Stock Advisor returns as of May 28, 2024
