3 dividend-paying tech stocks to buy in May
Dividends are underestimated by tech investors. If you buy a stock that is steadily increasing its dividend per share, it can generate an increasing flow of cash that you can take home as income or reinvest to buy more stocks. A lot of the most popular tech stocks these days aren’t profitable and don’t pay a dividend to shareholders, however, if you look at some older companies that are already profitable, there are plenty of tech stocks that pay a dividend every year. . These profitable companies may be safer stocks to hold in volatile market environments like the one facing investors today.
Here are the top three dividend-paying tech stocks to buy this month.
1. Microsoft: 0.86% return
Everyone knows Microsoft (MSFT -0.95%), the technology giant that has been the leader in enterprise and consumer software for many decades. The company owns and operates several lines of business, including Microsoft Office, Xbox video game consoles, LinkedIn and Microsoft Azure.
Microsoft is one of the biggest stocks in the world, with a market capitalization of $2.2 trillion, and for good reason. The company generated $49.4 billion in revenue last quarter, up 19% year-over-year, and operating profit of $20.4 billion, up 18% year-on-year. one year to the next. Steady growth comes from Microsoft Office and the Xbox division, but the highlight of this business right now is Intelligent Cloud and Microsoft Azure. The Intelligent Cloud segment grew revenue 26% year-over-year to $19.1 billion in the quarter, with Microsoft Azure revenue growing 46% year-over-year ( management does not disclose specific revenue). With the global cloud computing market expected to grow at a double-digit rate through 2030, Azure should continue to benefit as one of the industry’s leading infrastructure providers.
As of this writing, Microsoft has a dividend yield of 0.86% and is trading at a price/operating earnings (P/OI) ratio of 27. This P/OI is not cheap and the dividend yield isn’t very high, but with steady growth and dominance in its core operating segments, Microsoft looks like a safe tech stock you can own for many years.
2. Texas Instruments: yield of 2.61%
If Microsoft Azure is one of the pillars of the cloud computing industry, semiconductors are the pillar of computing in general. Put simply, none of our digital or internet-connected devices would work without semiconductor-based computer chips. Texas Instruments (TXN -0.99%) is one of the world’s leading semiconductor manufacturers, focusing specifically on the industrial and automotive markets. It offers more than 80,000 products for many different industries, serving different niches that customers around the world need.
In the first quarter of this year, TI’s revenue rose 14% year-over-year to $4.9 billion, and operating profit rose 32% year-over-year. another to reach $2.56 billion. There is a lasting tailwind for semiconductor products in the industrial and automotive sectors as more and more companies decide to digitize their products. The growth of electric vehicle manufacturing is a prime example. This tailwind should benefit TI demand over the next decade.
TI has a market cap of $162 billion. Free cash flow, management’s preferred metric for measuring profitability, was $6.45 billion over the past 12 months. This gives the stock a free cash flow (P/FCF) of 25. The dividend yield sits at 2.61%, providing investors with a healthy income stream each year just for stock ownership. With growing demand for semiconductors around the world, TI’s free cash flow and dividend payouts are expected to grow steadily over the next 10 years and beyond, to the benefit of long-term shareholders.
3. Taiwan Semiconductor: 1.57% yield
There is another semiconductor company to look at: Taiwan Semiconductor Manufacturing Company (TSM -0.56%), or simply TSMC. The Taiwanese manufacturer is the market leader in the semiconductor foundry industry. It has a unique business model compared to an integrated manufacturer like Intel. Instead of designing and building the chips themselves, TSMC lets other companies like Apple design chips for their electronic devices and focuses only on the manufacturing process. This focus and decades of expertise have led TSMC to become the most technologically advanced semiconductor manufacturer in the world, with over 50% market share.
Over the past 12 months, TSMC generated $59 billion in revenue and $25 billion in operating profit. Management expects revenue to grow at a compound growth rate of 15% to 20% through 2026 as the company rides on growing demand for semiconductors worldwide. This will give the company plenty of cash flow to support and likely increase its current dividend yield of 1.57%. With a market cap of $468 billion, the stock trades at a P/OI of 18.7, which seems cheap given TSMC’s dominance in the industry and a clear path to growth. its finances over the next decade.
Over the past 10 years, the dividend per share of these three stocks has increased by more than 200%, making them one of the largest large-cap dividend producers in the world. If their finances continue to grow over the next 10 years, there is a good chance that this growth in dividend per share will continue. This will create a growing stream of income for you if you buy and hold these stocks for the long term.