When many investors think of tech stocks, they picture growth stocks aggressively reinvesting profits to focus on growing as much as possible, as fast as possible. While that may be true for a lot of tech stocks, it’s just one side of the coin. Plenty of tech stocks offer above-average (and sometimes ultra-high) dividend yields.
Here are three dividend-paying tech stocks investors should consider this month.
1. Verizon Communications
Verizon Communications (VZ) is one of the big three telecom companies in the U.S., trailing only AT&T in market share. Unfortunately, things haven’t been the best for Verizon investors in the past few years, with the stock down over 15% in the past 12 months and 35% in the past five years.
Luckily, potential stock price growth isn’t the selling point for Verizon; it’s the dividend. Verizon has one of the highest dividend yields in the S&P 500. Its current quarterly payout is $0.65 per share with a trailing-12-month (TTM) yield of around 7.5%.
Telecom isn’t an industry known for high growth in its total addressable market, but modest growth is usually attained by the quality of services since the barrier to moving between providers isn’t high. Switching your phone service is much easier than switching banks or health insurance, for example.
One thing that should help Verizon’s growth is the new bandwidth for its 5G services. Four months ahead of schedule, Verizon was awarded the much-needed spectrum space that determines how many devices can connect to 5G, which should speed up its 5G rollout and adoption.
Despite its stock price struggles, Verizon is well positioned in an indispensable industry in everyday U.S. life. Further, the company has consecutively increased its dividend for 17 years through tough markets, showing it could likely continue that pattern. Verizon’s consistent and high dividend yield could give investors a margin of safety as the company navigates a tough landscape and works on ways to maintain customer retention.
2. Cisco Systems
Despite not getting the same attention as big tech giants like Apple and Microsoft, Cisco Systems (CSCO -0.65%) plays a comparably important role in the technology ecosystem. Cisco’s bread and butter is its connectivity and networking equipment that powers everything from large corporations to government institutions to data centers and more.
Cisco finished its fiscal year strong, with Q4 (ended July 29) revenue of $15.2 billion, up 16% year over year. It capped off a good year where the company’s year-over-year revenue growth was the highest it’s been in quite some time.
Investors should be encouraged by the company’s deliberate steps to be less reliant on its hardware and embrace software offerings like cybersecurity. Software and subscription-based services give a company more reliable cash flow. In Q4, Cisco had $6 billion in operating income, up 62% year over year.
Cisco’s position in network equipment gives it a competitive edge and foundation, but its focus on software should expand its growth potential for the foreseeable future.
It also helps that the company has increased its annual dividend every year since it started paying it in 2011. Its roughly 2.7% TTM dividend yield is a long shot from Verizon’s yield, but it’s still considerably higher than the S&P 500 average.
3. Texas Instruments
If you’re like me, your first introduction to Texas Instruments (TXN) was through grade school calculators. However, the company has expanded far beyond that, producing semiconductors, data converters, and integrated circuits used in many of today’s automotive and industrial systems.
Texas Instruments has faced some troubles recently (its Q2 2023 revenue was down 13% year over year), but that hasn’t come as a complete surprise, considering broader economic conditions and the cyclical nature of its business.
Despite near-term troubles, the company seems to be making moves that should pay off in the long term. The company has steadily increased its research and development spending and focused on improving its manufacturing facilities to improve efficiency and output.
Investing in R&D and operational improvements seems to be the right move at a time when the CHIPS and Science Act — which provided roughly $280 billion in funding to boost domestic semiconductor research and manufacturing — Texas Instruments is set to get a portion of that which could give a boost to its financials.
Texas Instruments has increased its annual dividend for 19 consecutive years with a 25% compound annual growth rate. Its quarterly dividend is $1.24, with a TTM dividend yield of around 2.9%. There also shouldn’t be any worries about its ability to keep growing its dividend, as Texas Instruments has more than enough free cash flow to cover its obligations.
— Stefon Walters
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Source: The Motley Fool