Thanks to the blistering performance of semiconductor giants like Nvidia (NASDAQ:NVDA), investors have clamored onto the innovation scene, looking to score the next big thing. However, smart market participants can double-dip into the passive income realm with tech dividend stocks.
To be clear, no one is suggesting that you ignore the search for outsized capital gains. From artificial intelligence to cloud computing to cryptocurrencies, there’s never been a more exciting time to participate in the broader tech ecosystem. However, the chances of finding a diamond in the rough are quite small. While you’re digging, you can make steady progress with tech dividend stocks.
In some ways, this approach is similar to football’s ground game. No, getting three yards per carry isn’t the most exciting statistic. However, consistent yardage helps move the sticks — and eats up the opponent’s clock. With this framework in mind, below are three compelling tech dividend stocks to consider.
Microsoft (MSFT)
One of the biggest innovators in the scene, Microsoft (NASDAQ:MSFT) has been making waves in recent years. Perhaps most notably, the company’s investment in OpenAI — the San Francisco-based startup known for introducing ChatGPT — has allegedly swelled to $13 billion. The company is also a juggernaut in the cloud computing space, particularly with its Office 365 business suite.
Fundamentally, one of the major societal transitions has been the rise of the gig economy. According to Business Research Insights, this global arena reached a valuation of $556.7 billion last year. By 2032, the segment could hit almost $1.85 trillion, implying a compound annual growth rate of 16.18%. If so, that’s another area where Microsoft may benefit.
At the moment, Microsoft offers a forward annual dividend yield of 0.74%. To be fair, that’s not the most exciting rate of passive income. However, the company provides solid growth potential despite its mammoth market capitalization. Over the trailing 52 weeks, MSFT stock gained almost 13%.
Perhaps most importantly, Microsoft represents one of the most reliable tech dividend stocks. Analysts are looking for earnings per share to reach $13.03 for this fiscal year, implying 10.42% growth. Moreover, the top line could ping at $278.46 billion, up 13.6%.
Broadcom (AVGO)
Ranking among the most important tech dividend stocks, Broadcom (NASDAQ:AVGO) plays a pivotal role in the functioning and stability of the innovation ecosystem. Primarily, the company is the connectivity backbone. Broadcom’s semiconductors are fundamental for wireless communication, networking equipment and data storage. Frankly, without its chips, the technologies we rely on daily would face disruptions.
Another area where Broadcom excels is in machine intelligence and data centers. Because the company provides the chips that power the massive data centers driving AI, cloud computing and big data analytics, the underlying products are integral to the scaling and deployment of digital information. As such, AVGO offers an excellent canvas for tech dividend stocks, benefiting from consistent and rising demand.
At time of writing, Broadcom’s forward dividend yield lands at 1.17%. No, it’s not the biggest passive haul one can get. However, AVGO stock excites investors because of the concurrent capital gains potential. For example, in the past 52 weeks, the equity nearly doubled in value. If I’m reading the technical leaves correctly, AVGO is poised to march even higher.
Fundamentally, the optimism is more than justified. Wall Street analysts are looking for fiscal 2025 sales to ping at $61.25 billion. If so, that would imply a nearly 19% lift, making AVGO one of the best tech dividend stocks to consider.
Cisco Systems (CSCO)
An oldie but a goodie, Cisco Systems (NASDAQ:CSCO) may not attract as many eyeballs as the usual suspects in the innovation ecosystem. Still, it remains a cornerstone institution, making it a worthwhile contender among tech dividend stocks. Primarily, the company’s claim to fame is enterprise connectivity. From campus networks to large-scale data centers, Cisco helps enterprises stay connected, productive and scalable.
You don’t hear about Cisco in the news too much, and in many ways, the brand staying in the shadows is a reflection of its importance. In other words, the fact that millions of people are able to go about their day without worrying about system issues is a testament to Cisco’s stability. Further, its offerings in the cybersecurity realm are crucial in protecting critical infrastructure from evolving threats.
On the passive income side, Cisco is much more generous than the other tech dividend stocks mentioned with a forward dividend yield of 2.6%. But it’s no slouch in the capital gains department, with CSCO stock returning almost 20% in the trailing one year.
In fairness, it’s not a growth machine, with analysts projecting top-line sales to hit $56.08 billion this fiscal year. If so, that would only be up 4.24% annually. Nevertheless, the inherent reliability of the business makes CSCO stock a top idea.
— Joshua Enomoto
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Source: Money Morning