If you're a tech investor who also demands that your investments pay you a reasonable and growing dividend, then you're in luck -- there are many successful technology companies out there that fit the bill.
Over the last several years, Microsoft has been an incredible investment. Under CEO Satya Nadella, it has seemingly made all of the right bets. The company is enjoying substantial revenue growth (analyst estimates call for revenue to grow by 12.4% in 2019 followed by an additional 10.4% in 2020) and extremely robust profitability. After delivering a solid $3.88 in earnings per share (EPS) in 2018 (up nearly 18% year over year), analysts expect the software giant to see its EPS rise 14.2% in 2019 to $4.43 and then another 12.4% in 2020.
Microsoft's financial success has translated into a share price that's up nearly 200% over the last five years and a dividend that continues growing unabated.
Indeed, Microsoft has a long history of increasing its dividend at an annual clip. The company last announced a dividend increase back on Sept. 18, 2018, for the dividend that it paid out on Dec. 13. I expect that around that time this year, Microsoft will announce another nice dividend increase.
One company that has an incredible capital return policy is Broadcom. This is a tech specialist that seems to deliver it all. Through a combination of organic growth and shrewd acquisitions on a regular basis, Broadcom has been able to deliver solid revenue and free cash flow growth to its shareholders.
The company's dividend policy is extremely generous: Management has publicly committed to doling out half of the free cash flow that it generates in one year to the dividend payments of the following year. The company's free cash flow generation has been on a veritable tear, which led the tech titan to double its dividend at the end of its fiscal 2016 followed by a nearly 72% surge at the end of fiscal 2017. At the end of its fiscal 2018, after another big bump in free cash flow, Broadcom gave its shareholders a 51% raise.
While it's not likely that Broadcom's dividend increases are going to be as large as the ones we've seen over the last three years, I think investors can safely count on meaningful dividend upticks in the years ahead -- including later this year.
Indeed, Broadcom's current financial guidance calls for the company to generate about $10 billion in free cash flow -- a 22% increase from what it turned in for fiscal 2018. If everything goes as the company expects, then I think shareholders have a dividend increase on the order of 22% to look forward to later this year.
Although IBM's business and, ultimately, stock price performance over the last several years hasn't been particularly inspiring, the company still generates mountains of free cash flow and has been dutifully increasing its dividend each year to please income-oriented investors.
While IBM's dividend increases in recent years haven't been particularly large, IBM shares currently offer the highest dividend yield -- 4.45% as of this writing -- of any stock mentioned here.
Given that the company's free cash flow is expected to be about flat this year and Big Blue needs to digest its recent acquisition of Red Hat, I'm not expecting the company to go nuts when it next increases its dividend (something that should happen the next time it declares a dividend, actually). However, if you're an IBM investor, you can count on yet another dividend raise this year -- even if it doesn't wind up being all that large.