2 dividend-paying tech stocks to buy in March
Inflation is higher than it has been in 40 years, national average gas prices have just reached record highs and Russia’s invasion of Ukraine is shaking up commodity markets.
Add to all that the Federal Reserve set to launch the first of several interest rate hikes this month, and stocks face pressures they haven’t seen in some time. Yet one of the mainstays investors can lean on in times of turmoil are dividend-paying stocks. Their payouts provide a measure of calm in a sea of turmoil.
Last year, the asset managers of Hartford Funds released a report showing the performance of S&P500 index with and without dividends, dating back to 1930. He found that dividend-paying stocks contributed 41% of the index’s total return over that 90-year period.
It covered times very similar to what we’re going through now, war and recessions, as well as the so-called ‘lost decade’, the 2000s when the tech stock market bubble burst, 9/11 happened and the real estate market collapsed. This led to the S&P 500 generating negative returns for investors, but dividend-paying stocks actually generated a positive return of 1.8%.
Whether you’ve recently converted to dividend investing or have long understood the value of owning stocks that pay you to hold them, the question remains: Which dividend stocks do you buy?
Mere pursuit of yield is a risky pursuit, as higher yield may indicate higher risk – you also need to look at the business. This pair of dividend-paying tech stocks not only happens to be solid income stocks, but also boasts great growth potential.
1. Texas Instruments
chip maker Texas Instruments (TXN -1.38% ) is not a flashy GPU manufacturer like Nvidia or high-end CPUs like those made by Intel. Instead, its chips are the workhorses of the industry, analog and embedded chips used by a wide range of customers in the automotive, communications, consumer electronics and computer markets. industry.
The no-frills semiconductor stock is also largely shielded from the global shortage of computer chips that hampers many of its peers. More than three-quarters of its $18.3 billion in annual revenue comes from analog chips produced in its own factories. These are mainly responsible for the 27% year-on-year growth recorded.
Texas Instruments pays a quarterly dividend of $1.17 per share which currently earns 2.8% per year. He’s increased the payout every year for 18 straight years, putting him on the path to becoming a dividend aristocrat, or a company that raises its dividend for 25 years or more.
Over the past three years, it has increased the dividend at a compound rate of 17% per year, higher than typical computer stock and more than double the rate of the average Nasdaq company.
The chipmaker also has a strong payout ratio of around 62%, a key metric for dividend investors as it helps highlight the sustainability of a dividend. Maintaining payment is also important to the company, and Texas Instrument Chairman, President and CEO Rich Templeton recently said, “Our dividends and stock buybacks reflect our continued commitment to return all cash flows. cash available to our owners.
Of the $8.8 billion in operating cash flow generated by Texas Instruments in 2021, it returned $4.4 billion to investors through dividends and stock buybacks.
Investors generally do not buy Apple (AAPL -2.39% ) share for its dividend. The tech giant pays investors $0.88 per share on an annual basis for a yield of 0.55%. Think of it as juicing your investment.
Apple reintroduced the payment in 2012 after suspending it in 1995, but since then it has steadily increased the payment every year. In fact, over the past three years, Apple has increased its dividend by an average of almost 23% per year. And because its payout rate is under 15%, it’s highly durable and has plenty of room to grow by similar double-digit rates for years to come.
The tech star had more than $37 billion in cash digging a hole in his pocket at the end of January, along with another $27 billion in short-term investments. His ability to keep tabs on what consumers are looking for ensures that sales will continue to grow to meet his needs for increased shareholder value.
Apple just unveiled its latest consumer electronics, and it lived up to expectations with a new inexpensive but feature-rich iPhone SE 3, an upgraded iPad Air, a Mac Mini macro called Mac Studio, and a a new Studio Display.
Analysts continue to dismiss Apple, believing that the best of its days are behind it, but the technology leader manages to regularly subvert expectations. With a large and loyal customer base, largely due to its stability, consistency and quality over the years, it has pricing power that few other companies can match.
In short, Apple is a dividend tech stock that you buy for future capital appreciation, bolstered by the income you get from a growing dividend payment.
This article represents the opinion of the author, who may disagree with the “official” recommendation position of a high-end consulting service Motley Fool. We are heterogeneous! Challenging an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and wealthier.