Tech stocks are known more for their strong long-term growth than their dividends. However, investing in technology companies with reliable dividends can be a great way to benefit from high-growth industries and grow your portfolio with the possibility of dividend reinvestment.
It's no coincidence that five of the six most valuable companies on the American stock market are high-tech companies. The industry generates huge amounts of cash, and some large companies can reward investors with more than just stock price growth.
The dividend yields of these companies may not compare to some non-tech stocks, but they're worth considering with their share prices soaring. Here are three high-dividend tech stocks to buy right now.
1.Microsoft
microsoft (MSFT -0.23%) has increased its dividend for 19 consecutive years, making it easily one of the most reliable choices in the tech industry. The company will raise its dividend yield to 0.75% in 2023, which translates to an annual dividend of $3 per share (three times the amount 11 years ago).
Consistent dividend growth reflects Microsoft's solid business model. Powerful products such as Windows, Office, Azure, and Xbox have made the company a tech giant.
The success of these products has led to a 144% increase in annual revenue and a 217% increase in operating profit over the past decade. Free cash flow, meanwhile, increased 134% to more than $63 billion last year.
In addition to solid financials, there are many reasons to believe Microsoft will continue to increase its dividend. The company pays out only about 26% of its profit as dividends, which suggests it may continue to increase its dividend even in the face of headwinds.
Additionally, the company is investing heavily in some of the fastest growing areas, including cloud computing and artificial intelligence (AI). Microsoft's advantageous position in these markets means its revenues are likely to continue rising over the long term.
With a forward price/earnings ratio (PER) of 35 times, the company's stock price is somewhat high. However, its dominant role in the tech space and consistent dividend growth means the stock is likely well-valued and worth considering now.
2. Apple
Rather than just focusing on high yields, one of the best ways to find dividend stocks is to look for companies with significant cash resources, such as: apple (AAPL -0.90%). A focus on high yields can lead to investments in financially distressed companies. Dollar-cash companies like Apple, on the other hand, can almost guarantee long-term dividend growth.
Over the past 10 years, the company's dividend yield has increased by 120%. In 2023, it rose to $0.24 per quarter, yielding 0.5%. Apple has increased its dividend for his 12th consecutive year, and only needs about 15% of its profits to pay it out.
Apple's yield may not be as impressive as other popular dividend stocks like verizon or coca cola, but if it maintains its current dividend growth trajectory, the dividend could double again over the next 10 years. With its stock price up more than 800% since 2014, the company could be one of the smartest long-term investments.
And it's hard to argue with Apple's powerful position in the technology space. The company generated nearly $100 billion in free cash flow last year, thanks to the huge popularity of products like the iPhone, MacBook, and iPad, and its many digital services.
The company has a forward P/E of 29, making it slightly cheaper than Microsoft, but still expensive. But its reliable dividend and expansion into lucrative markets like AI and virtual reality make the stock a solid buy this month.
3. Nvidia
Nvidia's (NVDA -0.95%) Business has exploded in the last year as the company's graphics processing units (GPUs) have become the go-to for AI developers around the world. The company became the first semiconductor company to have a market capitalization of more than $1 trillion, and its stock price rose 239% in 12 months.
The company paid its first dividend in 2013 and increased it every year until November 2018. Dividends remained at a respectable level of $0.64 per year until May 2021. Due to a 4-for-1 stock split that year, the quarterly dividend plummeted to $0.04 per share. The current yield is 0.03%.
But it's still an attractive high-dividend tech stock.When companies prefer Amazon and alphabet There's no dividend to speak of, but NVIDIA's impressive stock price growth and even the meager dividend make the stock worth buying.
Nvidia's quarterly revenue increased 200% over last year, and operating profit soared 729%. The company is on a promising growth trajectory and is likely to raise its dividend in the coming years.
Data by YCharts.
Additionally, this chart shows that Nvidia's earnings could reach $24 per share by fiscal year 2026. Multiplying this number by the company's forward P/E ratio of 49 yields a stock price of $1,176, with the stock expected to grow 96% over the next two fiscal years.
In addition to its reliable dividend, Nvidia stock looks like an easy investment right now.
John Mackey, former CEO of Amazon subsidiary Whole Foods Market, is a member of the Motley Fool's board of directors. Alphabet executive Suzanne Frye is a member of The Motley Fool's board of directors. Dani Cook has no position in any stocks mentioned. The Motley Fool has positions in and recommends Alphabet, Amazon, Apple, Microsoft, and Nvidia. The Motley Fool recommends his Verizon Communications. The Motley Fool has a disclosure policy.
