Many investors mistakenly believe there is a trade-off between growth and income. Either a company can produce strong capital gains, or it is a stodgy slow-moving blue chip. However, there are a surprisingly large number of technology companies that pay attractive dividends as well.
In fact, as 2022 demonstrated, it can be risky to invest solely in tech firms that are speculative and have trouble generating consistent profits. Firms that have a reliable dividend track record are typically more stable and can serve as strong building blocks for an investor’s long-term portfolio. These eight tech stocks offer both growth and income. They all have dividend yields above 2% today, which is higher than the S&P 500 index overall.
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Here are eight top tech dividend picks today:
| Stock | Forward dividend yield |
| Cisco Systems Inc. (ticker: CSCO) | 2.9% |
| Texas Instruments Inc. (TXN) | 3% |
| Broadcom Inc. (AVGO) | 2.2% |
| Qualcomm Inc. (QCOM) | 2.8% |
| International Business Machines Corp. (IBM) | 4.7% |
| Fidelity National Information Services Inc. (FIS) | 3.6% |
| United Microelectronics Corp. (UMC) | 8.3% |
| Open Text Corp. (OTEX) | 2.6% |
Cisco Systems Inc. (CSCO)
Cisco Systems is a perfect example of how tech companies mature over the years. At the dawn of the internet era, CSCO stock was a high flyer. In fact, it briefly became the world’s most valuable company during the dot-com bubble. Since then, Cisco stock has not kept up with many tech stock alternatives. The underlying business, however, has boomed in the ensuing 20 years.
To that point, Cisco now generates more than $50 billion in annual revenues and has earned $11.3 billion in net income over the past 12 months. While sales of networking equipment have leveled out over the years, Cisco has moved to selling software and services such as cybersecurity to overlay on top of its traditional networking gear business. Unlike in years past, Cisco is now an attractive value stock, with shares selling for less than 14 times forward earnings and giving out a 2.9% dividend yield as of Aug. 15.
Texas Instruments Inc. (TXN)
Texas Instruments is the worldwide leader in analog semiconductors. This type of chip turns real-world information, such as weather conditions, into data that machines can interpret. Analog semiconductors are also attractive since they tend to have longer product cycles, more stable sales volume and more limited competition than firms typically see in the rest of the semiconductor industry.
Texas Instruments in particular has leaned heavily into smart vehicles and appliances. As the automotive industry continues to electrify and implement features such as self-driving assist, Texas Instruments will sell far more analog chips to the original equipment manufacturers. TXN stock has sold off recently amid an inventory build-up in the semiconductor industry. That is a short-term headwind, to be sure, but it shouldn’t affect the long-term outlook. With the recent dip, TXN stock now yields 3% as of Aug. 15.
Broadcom Inc. (AVGO)
Broadcom is a massive American semiconductor company. With 20,000 employees and more than $33 billion in annual revenues, Broadcom is already a dominant mover and shaker in its industry. Broadcom seems set to grow even larger, as it intends to buy VMware Inc. (VWM) in a monumental $69 billion deal. United Kingdom antitrust regulators gave the deal the thumbs-up in July, removing much of the uncertainty around Broadcom shares going forward.
Shares have rallied dramatically in 2023 amid the improved outlook for semiconductor stocks in general and Broadcom in particular. Even so, they’re still going for less than 20 times forward earnings and offer a market-beating dividend of 2.2% as well.
Qualcomm Inc. (QCOM)
Qualcomm is a leading semiconductor company focused on telecom equipment. The firm built its business on patents and intellectual property supporting 3G and 4G mobile telephony. Nowadays, Qualcomm is an integral player in the 5G mobile rollout. It has also developed its own chipsets, such as Snapdragon, which can power high-end phones and tablets.
Qualcomm stock has fared poorly so far in 2023 amid a sharp slowdown in the smartphone industry. Weakness in the Chinese market in particular continues to hurt Qualcomm and other chip leaders. That said, investors might be losing sight of the bigger picture. Qualcomm has plenty of other irons in the fire, including its leading position in chips for mobile artificial intelligence applications. It has an excellent track record in developing cutting-edge communications technology, and investors are getting a bargain here with the stock at just 12 times forward earnings.
[READ: 6 of the Best AI ETFs to Buy for 2023]
International Business Machines Corp. (IBM)
Many years ago, IBM was one of the world’s most dominant computing firms, but the company largely missed the transition from mainframe to personal computers, ceding the pivotal operating system market to Microsoft Corp. (MSFT). IBM has missed out on many other key technological innovations since then.
While many investors may see IBM as a company far past its prime, the firm is enjoying a quiet revival of its fortunes. IBM divested its slowest-moving unit with the Kyndryl Holdings Inc. (KD) spin-off in 2021. Its revenues bottomed that same year and are now moving upward again. This is powered by the company’s investments in cloud computing and its Watson AI unit, among other factors.
The stock price chart doesn’t look that great, but the picture improves when considering the large dividend yield. In fact, on a total return basis — which includes the effect of dividends — IBM stock hit a new all-time high in December 2022 and is back near that mark again today. With shares at less than 15 times forward earnings and with a generous 4.7% dividend yield, IBM stock is a worthwhile holding for tech dividend investors.
Fidelity National Information Services Inc. (FIS)
Fidelity National Information Services is a diversified technology company offering solutions to financial and banking customers. It operates software for mobile and online banking, fraud detection, risk management, electronic funds transfers, retirement and wealth management solutions, among various others.
The firm’s stock has plummeted over the past 18 months as investors have bailed out of anything related to the payments industry. That’s somewhat understandable. The surge in e-commerce and digital payments adoption has slowed as the economy has reopened.
However, things have gotten out of hand. FIS stock is now selling for less than 10 times forward earnings. A forthcoming spinoff of the firm’s Worldpay division could unlock value. Additionally, famed value investor Seth Klarman has taken a major position in FIS stock.
United Microelectronics Corp. (UMC)
While Taiwan Semiconductor Manufacturing Co. Ltd. (TSM) gets all the attention, it’s not the only semiconductor foundry in Taiwan. In fact, with a market cap of more than $17 billion, United Microelectronics is another significant player in the industry. UMC is subject to the same geopolitical risks as it relates to Taiwan’s relationship with China. As one of the smaller players in the industry, United Microelectronics may not be able to invest quite as much capital in next-generation plants as key rivals like TSM.
That said, these concerns have pushed UMC stock down to a highly attractive entry point. Shares are going for less than 10 times forward earnings. UMC also paid 58 cents per share in dividends this year, which amounts to an 8.3% dividend yield. It should be noted that UMC’s dividend yield is variable and depends on annual profits, so that payout will fluctuate. Regardless of the precise figure, UMC is a semiconductor firm that rewards its shareholders with a large income stream.
Open Text Corp. (OTEX)
Open Text is a diversified management software and solutions company. Hailing from Canada, Open Text now offers its clients records management, e-signing, customer analytics, secure messaging and other such features. Open Text has built its broad business line through numerous acquisitions over the years. It just made another large one in 2023, paying $5.8 billion for IT consultancy shop Micro Focus.
Open Text paid just 2.3x revenues for Micro Focus. That’s an attractive price for a large deal that further expands Open Text’s presence in the European market. Open Text trades at a downright attractive valuation; after its recent dip, shares go for about eight times forward earnings. And, despite firmly being a growth company, Open Text offers up a solid 2.6% dividend yield as well.
[SEE: 9 Growth Stocks That Also Pay Dividends]
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8 of the Best Tech Dividend Stocks to Buy originally appeared on usnews.com
Update 08/16/23: This story was previously published at an earlier date and has been updated with new information.
