With interest rates climbing, stock market volatility enduring, and fears of an economic slowdown mounting, finding reliable sources of investment income is top of mind for many investors nowadays.
While technology stocks are typically seen as your high-growth but dividend-light corner of the market, some of the most mature, financially-sound companies in the sector actually provide attractive and growing dividend yields worth a closer look.
Below I breakdown my 7 top picks among dividend-paying tech stocks based on detailed financial analysis into their dividend safety and growth potential. Whether building a long-term income stream or just aiming to diversify your tech portfolio holdings, give these dividend winners a consider.
An Overview of 7 Cash-Rich Tech Leaders With Growing Dividends
| Company | Sector | Dividend Yield | Annual Payout | Years of Dividend Growth |
|---|---|---|---|---|
| Cisco | Networking Equipment | 3.1% | $1.52 per share | 11 |
| Texas Instruments | Semiconductors | 2.8% | $4.60 per share | 18 |
| Qualcomm | Wireless Communications | 2.3% | $3.00 per share | 11 |
| IBM | IT Infrastructure | 4.9% | $6.60 per share | 27 |
| Microsoft | Software & Cloud | 1.2% | $2.48 per share | 20 |
| AT&T | Telecommunications | 6.4% | $1.11 per share | 37 |
| Apple | Consumer Tech | 0.6% | $0.92 per share | 10 |
*Yields, payouts, and streaks as of November 2022
Spanning critical tech infrastructure, services, and devices, these 7 leaders generate substantial cash to support not just business investment but reliable dividends too.
Their dividend growth histories are equally impressive, with each company demonstrating consistent annual payout hikes from healthy underlying earnings expansion.
Let‘s analyze what makes these tech names compelling dividend plays.
1. Cisco Systems (CSCO)
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Industry Leader in Enterprise Networking Infrastructure
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Q1‘23 Revenue Up 6% Year-over-Year
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$0.38 Quarterly Dividend, Forward Yield 3.1%
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58% Payout Ratio with Ample Room for Further Dividend Growth
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$20 Billion Remaining on Current Share Repurchase Authorization
Cisco claims roughly 50% global market share across IT switches and routers counted on by over 70% of internet traffic flows. Its networking technology remains vital for enterprise connectivity, security, and efficiency.
With companies still investing to support hybrid work environments post-pandemic, Cisco enjoys strong sales of switches, wireless products, and security software. Revenue crossed $13 billion last quarter.
Its high gross margins above 60% generate substantial cash enabling both R&D funding into new products and over $6 billion returned to shareholders annually via buybacks and dividends.
Cisco initiated dividends in 2011 at just $0.06 per share quarterly. The current $0.38 dividend reflects 11 consecutive years of payout growth averaging 12% annually – a streak very likely to continue.
2. Texas Instruments (TXN)
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Global Leader in Analog & Embedded Semiconductors
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Q3‘22 Revenue Up 13% Driven by Industrial & Automotive Chips
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$1.15 Quarterly Dividend, Forward Yield 2.8%
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50% Payout Ratio with 19 Years Straight of Dividend Growth
Texas Instruments holds a dominant position in analog and embedded chips essential for translating real-world signals and controlling electromechanical devices.
With over 45,000 products powering nearly every type of electronic system from appliances to smart factories to spacecraft, TI enjoys tremendous market diversification ensuring stable demand cycles for its technology.
Robust free cash flow exceeding $7 billion annually provides excellent coverage of the rising dividend payment. TI has increased its payout for 19 consecutive years at a 21% CAGR during that timeframe.
Its reasonable earnings payout policy gives confidence that double-digit annual dividend growth should continue in the years ahead as the company expands margins through its efficient manufacturing operations.
3. Qualcomm (QCOM)
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Global Leader in Smartphone & Wireless Technologies
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FY 2022 Sales Up 32%, Sees Multi-Year Growth from 5G Adoption
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$0.75 Quarterly Dividend, Forward Yield 2.3%
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30% Payout Ratio Following 41% Dividend Hike in March 2022
Qualcomm is the driving force behind 5G network expansion and mobile technology innovation as over 90% of smartphones beyond Apple‘s rely on Qualcomm chipsets.
Not only does the company collect license fees from over 26 billion mobile devices using its IP worldwide, but its state-of-the-art system-on-chip (SoC) integration allows premium pricing for its offerings leading to over 30% operating margins lately.
With smartphone users rapidly upgrading devices to unlock 5G speeds and Qualcomm collecting royalties on over two billion 5G handset shipments by next year, tremendous growth lies ahead.
Qualcomm just raised its dividend in March 2022 by 41% marking its 11th straight annual increase. Healthy cash flow coverage supporting its below 30% payout ratio signals substantial dividend hikes over the coming years as mobile communications march ahead.
4. International Business Machines (IBM)
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Global Leader in Enterprise IT Infrastructure
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Shifting Towards Cloud, AI, Security To Accelerate Revenue Growth
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$1.65 Quarterly Dividend, Yield 4.9%
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28 Consecutive Years of Dividend Increases
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5% Projected Sales Growth in FY2022, Margin Expansion
While legacy hardware and software sales decline, IBM retains dominant market share providing essential on-premise IT infrastructure and services needed to integrate complex enterprise systems.
Looking ahead, IBM is aggressively transitioning towards higher growth areas like multi-cloud software and management, AI analytics, and cybersecurity while affirming its FY2022 revenue target representing mid-single digit growth.
Robust free cash flow generation gives confidence in IBM‘s unmatched 28 years track record for consecutive dividend increases despite variability in profit margins over time.
Trading at just 12x forward earnings and with its rare tech stock yield approaching 5%, IBM offers fantastic value for income investors.
5. Microsoft (MSFT)
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Global Technology Titan, Over $2.2 Trillion Market Cap
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Sales Up 22% in FY2022 Driven by Cloud and Office 365 Growth
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$0.62 Quarterly Dividend, Forward Yield 1.2%
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20 Consecutive Years of Fast-Growing Dividend
Microsoft requires no introduction as a leader across personal computing, cloud infrastructure, artificial intelligence, gaming, and more.
Despite its enormous size already, revenue jumped 22% year-over-year in Fiscal 2022 to over $198 billion highlighting the vital software and services it sells. Operating margins also neared 45% showcasing tremendous profitability.
After initiating a dividend in 2003, Microsoft has raised its payout every single year since, multiplying 14-fold over that span to the current $0.62 quarterly rate.
Its low 22% payout ratio and ever-rising free cash flows give confidence that Microsoft‘s dividend growth story remains just getting started.
6. AT&T (T)
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Global Leader in Wireless and Wireline Telecom Services
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138 Million Mobile, Broadband & Video Connections Across America
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Recently Completed WarnerMedia Spin-off to Refocus as Connectivity Provider
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$0.2775 Quarterly Dividend, Yield 6.4%
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37 Consecutive Years of Dividend Growth
Despite cord-cutting pressures on its pay-TV business, AT&T‘s essential wireless, home internet, and business telecom services nurture reliable earnings and steep cash flows thanks to generous profit margins and recurring subscriber revenues.
AT&T recently simplified its model by spinning off media assets to accentuate its core role connecting individuals, homes, devices, and business systems through unrivaled nationwide mobile and fiber infrastructure supporting 5G rollout.
Renowned for not cutting its dividend during economic and industry downturns in the past, income investors trust AT&T‘s 37 straight years track record of modest annual dividend growth.
The stock‘s staggering yield approaching 7% compensates for slower capital appreciation potential as management focuses on enhancing network capabilities and paying down debt.
7. Apple (AAPL)
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Largest Publicly-Traded Company by Market Cap
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Iconic Brand Power Across iPhone, Mac, iPad and Wearables
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FY 2022 Revenue Up 8% Despite Supply Chain Challenges
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$0.23 Quarterly Dividend, Forward Yield 0.6%
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12 Consecutive Years of Dividend Growth Since 2012 Reinstatement
Apple‘s leading technology portfolio including the iPhone, iPad, Mac computer, Apple Watch, and accessories ensures enduring demand despite premium pricing driving best-in-class 65% gross margins.
Services like the App Store, Apple Music, and Apple Pay also foster an unrivaled ecosystem stable that promotes customer loyalty and recurring revenues across over 1 billion device users globally.
While sub-1% dividend yield is a drawback for income investors, Apple has aggressively raised its dividend each year since restarting payouts in 2012 growing nearly 5-fold over that period.
With rock-solid finances including $170 billion of cash and only modest 15% payout ratio, Apple‘s dividend growth story likely remains in early innings as well.
I hope this analysis has shed light on why above average dividends can absolutely have a place for investors looking to tap into leading technology stocks.
Cisco, Qualcomm, Texas Instruments and the rest demonstrate that industry leadership, enduring competitive strengths in key markets, and financial discipline together support not just innovation but rewarding loyal shareholders with safe and growing dividends over time.
Nonetheless, sustainably funding R&D and M&A over the long-run remains imperative for tech companies to drive future breakthroughs. As such, limiting dividend exposure to 5-10% of your overall stock portfolio allows capturing this income potential while retaining focus on higher total return.
Stay diversified out there! Let me know if you have any other questions.
