3 Dividend-Paying Tech Stocks to Buy in February – The Motley Fool
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Each of these businesses is a market leader that offers investors a stable dividend.
When a lot of investors think about tech stocks, their minds don’t typically go straight to dividends. Tech stocks are known for their stock price growth potential. But investors shouldn’t ignore the income potential.
With volatility being as much a part of the stock market as stocks themselves, dividends can provide reliable income despite stock price movements. For investors interested in tech stocks that can provide dependable income, the following three are good options to add to your portfolio.
You’re not alone if you’re not used to seeing Meta Platforms (META -1.41%) and the word “dividend” together. That’s because Meta never offered a dividend until it announced one on Feb. 1 with its 2023 fourth-quarter and full-year earnings report.
Meta’s first-ever dividend will be $0.50 per share, payable on March 26, to investors with shares as of the close of business on February 22.
Despite some missteps and bad PR over the past few years, Meta remains a cash cow. It made $134.9 billion in revenue in 2023, up 16% from a year ago. Its net income growth outpaced revenue, growing 69% in a year to just over $39 billion. This is a sign Meta is operating more efficiently, which has been a major goal for the company recently.
META Revenue (Quarterly) data by YCharts
Meta currently has over $80 billion authorized for share buybacks, which will likely boost shareholder value in the coming years, even with the stock trading at 52-week highs. As Meta continues to expand its customer base and become more competitive in the digital ad industry, it has avenues to continue its growth.
In the fourth quarter, Meta made $11.5 billion in free cash flow. That’s more than enough to cover the dividend obligation for its 2.57 billion outstanding shares. There shouldn’t be any questions about the company’s ability to sustain (and increase) its new dividend going forward.
Taiwan Semiconductor Manufacturing Company (TSM 1.38%), or TSMC, is one of the world’s most valuable tech companies. However, the average person might not know that because the company operates behind the scenes. TSMC is a semiconductor foundry that produces semiconductors for other companies to use in their own products. Its chips are in smartphones, cars, and dozens of other electronics.
The semiconductor industry is cyclical. When demand for electronics rises, semiconductor companies typically see increased orders; when demand for electronics falls, semiconductor sales typically follow. The industry has been on the downturn of this cycle for the past couple of years with inflation and rising interest rates, but signs point to this reversing soon with a rebound in smartphone and PC sales.
TSM Revenue (Quarterly YoY Growth) data by YCharts
TSMC’s quarterly dividend is $0.48, with a yield currently around 1.6%. It may not be the most impressive yield, but it’s still more than the S&P 500 average. TSMC has explicitly said it’s committed to its cash dividend, so investors can be confident in its reliability. It began paying a dividend in 2004, and has never reduced it.
TSMC plays a critical role in the tech ecosystem, and its top-of-the-line chips give it a competitive advantage that won’t be easily surpassed.
There aren’t many tech stocks more sought after for their dividends than telecom giant AT&T (T 2.15%). When AT&T spun off its WarnerMedia business in early 2022, it slashed its dividend in half to $0.2775 per share. Even then, it remained one of the highest-yielding dividend stocks in the S&P 500 — and still is, with a trailing 12-month yield of around 6.4%.
It’s a good thing AT&T offers an attractive dividend, because its stock price has been lackluster over the past decade. Luckily for investors, the worst days may be behind AT&T. Instead of spreading itself thin, a refocus on its core wireless and internet businesses has gotten the business back on the right track. Its recent wireless and Fiber growth has been impressive.
AT&T is a top player in an industry that has become vital to everyday American life. AT&T isn’t going anywhere, and judging from its recent jump in free cash flow, neither is its dividend. In 2023, AT&T made $16.8 billion in free cash flow. That’s $2.6 billion more than in 2022 and more than enough to cover its dividend and debt obligations.
Investors shouldn’t anticipate an increase in AT&T’s dividend (although it’s not out of the question), but a yield routinely above 6% makes it an attractive option for long-term investors.
Randi Zuckerberg, a former director of market development and spokeswoman for Facebook and sister to Meta Platforms CEO Mark Zuckerberg, is a member of The Motley Fool’s board of directors. Stefon Walters has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Meta Platforms and Taiwan Semiconductor Manufacturing. The Motley Fool has a disclosure policy.
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