When we spoke on February [25], I told you about a biopharmaceutical firm that is paying investors a juicy 4% dividend.
Today, I have three more impressive tech leaders for dividend hunters to invest in.
Over the last decade or so, high tech and the life sciences have become great places to search for increasing yields.
Let me explain. See, in today’s market, where interest rates are set to rise at least three times this year, many investors are shopping for the fattest dividend payouts they can find.
But there’s a very profitable flip side to dividend investing and something we talk about here often, and for good reason – the power of compound interest.
For example, if a stock’s dividend is $1 and grows by 7% a year, the payout would double in just over a decade to $2. And when there’s price appreciation, it’s like getting free money.
With that in mind, I want to show you three tech leaders that have hiked their dividends by at least 50% in five years while also crushing the market…
These Tech Stocks Increased Dividend Returns by 50% or More in Just Five Years
It’s important to remember that when you invest in a dividend stock, especially one where yields are growing, you want to reinvest all that money back into the stock.
That way, the company is basically paying you to hold shares. Sure, it may start with a modest amount. But over time, the growth really adds up.
And ironically, tech has become a great place to find dividend growers.
The elite stocks in this sector throw off so much cash that they can afford to invest heavily in the R&D (research and development) needed to keep expanding while also rewarding shareholders with cash payouts along the way.
Consider that of the top 10 firms in terms of cash and securities on hand, five are in tech, based on data compiled by Investors Business Daily. They hold a combined $644.5 billion, accounting for 24% of cash held by members of the S&P 500.
You can see why this dynamic has transformed some of the sector’s biggest players from laggards to dividend leaders.
Again, that last statement is based on their growth rates, not their current stated yields. Let me show you three great stocks in this category.
Take a look…
Tech Dividend Grower No. 1
To be honest, this one caught me by surprise. And that’s because, in Silicon Valley, it used to be difficult to find excellent chip-related firms throwing off stable enough cash that could be used to pay consistent dividends.
See, the Valley used to be a place of boom and bust. Not any longer. All the major growth trends – from mobile and the cloud to AI and big data – need sophisticated and powerful chips, which explains why the sector is on pace to hit $600 billion in global sales this year.
And operating all over the world, Applied Materials Inc. (AMAT) supplies pretty much every semiconductor manufacturer, whether they make smartphone processors, LCD displays, memory chips, or sensors.
In 2017, AMAT paid annual dividends of 40 cents. Last year, that figure climbed to 96 cents, an increase of 140%.
That’s on top of the 285% the stock has gained in the past five years.
By contrast, even with its recent historic run, the S&P 500 was up 89.2%.
Tech Dividend Grower No. 2
To be sure, Apple Inc. (AAPL) has gotten more buzz for its stock splits than its dividend payouts.
That’s because the iDevice King split the stock 7-to-1 in June 2014 and then again 4-to-1 in August 2020.
Back in January 2017, the annual payout stood at 56 cents. By January of this year, the annualized payout came in at 88 cents. That’s a total increase of 57.1% in five years.
And Apple has plenty of cash on hand to maintain its commitment to shareholders. We’re talking $202 billion, which is 7.6% of all cash held by S&P 500 firms.
Then again, it’s coming off a record quarter announced on January 22, with sales for the fiscal period rising 11% to $123.9 billion.
Make no mistake, this is a shareholder-oriented firm. During that first fiscal quarter, it bought back shares totaling $20.5 billion.
It’s no wonder the stock has gained roughly 403% over the past five years, not counting dividends, with more upside on the way.
Tech Dividend Grower No. 3
On January 25, Microsoft Corp. (MSFT) gave the market some badly needed news at a time of selling pressure across the board.
Wall Street was worried that rising inflation and the spread of Omicron might hurt sales, profits, and dividends.
Turns out, there was no reason to worry. Microsoft delivered a beat-and-raise quarter.
On an annual basis, Microsoft earnings rose 22% while sales increased 20% to $50.7 billion – all this amid a recent decision to buy game maker Activision Blizzard (ATV) for $68.7 billion in cash.
That deal has not closed yet. But you can see the company has plenty of cash for organic and bolt-on growth along with the dividend.
Back in February 2017, the annualized payout was $1.56. This month, the figure came in at $2.48 for a five-year gain of roughly 59%.
And that’s on top of the 368.7% the stock has gained over the past five years.
Add it all up, and you can see why I like to remind folks that tech is the sector where both the stock price and the yield can show massive growth.
So, if you don’t already own these great firms, I believe you should consider moving in now at steep discounts – or at the very least put them on your wealth-building watchlist.
Cheers and good investing,
— Michael A. Robinson
Source: Strategic Tech Investor