3 Dividend-Paying Tech Stocks to Buy in August
High-flying technology stocks like You’re here tend to attract the most media and investor attention. But investors who want more sustainability and less volatility in their portfolios might instead focus on dividend-paying stocks. Dividend payers, especially those that increase their dividends every year, can be great stocks to hold for the long term and some can be just as effective in helping someone build wealth to fund their retirement.
Let’s take a look at three dividend-paying tech stocks worth taking a closer look at in August.
1. Microsoft: 0.88% dividend yield
Microsoft (MSFT -0.26%) is one of the largest companies in the world with a market capitalization of $2.1 trillion. The software giant is known for its Microsoft Office products, personal computing division, and even its Xbox video game segment. All of these subsidiaries helped boost the company’s revenue to $198 billion last year.
However, the highlight of Microsoft’s business right now is cloud computing, specifically its Azure division. Azure is a cloud infrastructure provider that sells computing and storage services to other companies, allowing them to forgo buying computing servers themselves. As Amazon Web Services (AWS) and Alphabetfrom Google Cloud, Microsoft Azure is growing rapidly as the world moves from on-premises servers to the cloud. Last quarter, Microsoft’s intelligent cloud revenue was $20.9 billion, with Azure driving most of that growth with revenue up 40% during the period.
Azure, along with the sustainability of Microsoft’s other segments, should help propel Microsoft’s earnings power to new heights in this decade. This earnings growth will help fuel its growing dividend, which currently yields 0.88%. While not a huge return, the company’s dividend per share has increased 200% over the past 10 years. If Azure continues to grow at a rapid pace, investors should expect this dividend growth to continue in the future.
2. Texas Instruments: 2.51% dividend yield
Not just a graphing calculator company, Texas Instruments (TXN -0.33%) is one of the world’s leading semiconductor manufacturers. Unlike cutting-edge technology innovators, the company focuses on a diverse portfolio of older technology chips that are in constant demand in the manufacturing, automotive and electronics industries.
This focus, coupled with a great brand, has led Texas Instruments to generate significant shareholder returns. Last quarter, revenue grew 14% year-over-year to $5.2 billion, with trailing 12-month free cash flow of $5.9 billion. With all that cash flow, the company pays a healthy 2.51% dividend that’s increased 557% over the past 10 years.
Industry experts expect demand for semiconductors to grow more than 66% by 2030. Along with this industry tailwind, Texas Instruments looks poised to continue generating revenue streams. cash sold for shareholders and to steadily increase its dividend payments.
3. Apple: 0.55% dividend yield
Finally, we have the largest company in the world, Apple (AAPL -0.14%). The $2.7 trillion market capitalization company has dominated the smartphone market with its high-end iPhone product, especially in the United States. It also offers a growing mix of other computing devices such as the iPad, Airpods, and Apple Watch. In addition to these devices, Apple has a strong software and services business, driven by sales on its App Store. For reference, Apple’s services business generated $19.6 billion in revenue last quarter, or nearly $80 billion on an annualized basis.
This combination of hardware and software dominance has led to Apple becoming extremely profitable. Over the past 12 months, the company generated $108 billion in free cash flow. With so much cash, Apple has increasingly returned cash to shareholders in the form of stock buybacks and dividends. Its dividend currently pays just 0.55% but has increased 841% over the past 10 years.
If you believe in the continued dominance of the iPhone and Apple’s computing ecosystem, this can be a great dividend payer to have in your wallet.
A Word About Yields
For the context of dividend yields, it’s worth noting that yields can look quite low (even when the company pays a decent dividend) if the stock price rises quickly.
These three stocks are outperforming all S&P500 over the past two years and therefore their dividends seem deceptively low. Dividend-oriented investors should take this stock price appreciation into account when determining whether the dividend-paying stock is worth considering.
John Mackey, CEO of Whole Foods Market, an Amazon subsidiary, is a board member of The Motley Fool. Suzanne Frey, an executive at Alphabet, is a board member of The Motley Fool. Brett Schaefer has no position in the stocks mentioned. The Motley Fool owns and recommends Alphabet (A shares), Alphabet (C shares), Amazon, Apple, Microsoft, Tesla and Texas Instruments. The Motley Fool recommends the following options: long calls $120 in March 2023 on Apple and short calls $130 in March 2023 on Apple. The Motley Fool has a disclosure policy.