The COVID-19 pandemic continues to weigh heavily on equity markets. Indexes such as the Dow Jones Industrial Average and the S&P 500 have shown significant volatility. Double-digit percentage losses or gains on a single day have become much more commonplace in recent weeks, making investors sweat.

As of March 27, the S&P 500 was trading nearly 25% below its record highs set just over a month prior. The ongoing bear market will continue to remain bumpy over the next few months as investors take stock of the coronavirus's effect on the global and domestic economy.

However, this time of crisis provides an opportunity for investors to buy high-quality stocks at cheaper valuations. The massive decline in stock prices has also sent dividend yields for many companies higher, making the companies attractive for income investors, at a time when bond rate yields are at record lows.

Here we look at three tech giants that pay dividends with an increased yield that should continue to pay dividends in the long term.

a calculator sits on financial charts while showing the word "dividends" on its screen

Image source: Getty Images.

1. Apple: A trillion-dollar giant

When equity investors think about whether to buy Apple (NASDAQ:AAPL) stock, its dividend payment is probably the last criterion that comes to mind. The iPhone manufacturer is much more of interest to growth investors over the past decade, and it has expanded into several other segments during that time to help maintain that growth trajectory, including services, wearables, and online streaming.

Apple, with its $1.1 trillion valuation, has increased investor wealth by leaps and bounds over that timeframe. The stock is up about 800% since the start of 2010 and has been one of the top performers in the S&P 500. With more than 2.2 billion iPhone purchases since its launch and a rapidly expanding Services business, Apple has been able to maintain a huge cash reserve.

At the end of the December quarter, Apple's cash balance stood at a massive $107.2 billion. With a term debt balance of $91.8 billion and yearly operating cash flows of $73.2 billion, Apple can easily make principal and interest payments.

Apple has an annualized dividend payout of $3.08 per share, which indicates a yield of 1.23%. The tech giant has increased dividend payments in seven consecutive years, and in the last three years, dividends rose by an annual rate of 7.8%.

Since fiscal 2012, Apple has paid shareholders $92 billion in dividends. Apple has a payout ratio of just 23.4%, giving it plenty of leeway to continue increasing these payments going forward.

Apple has several subscription services, such as Apple Music, Apple TV+, iCloud, and Apple Arcade. While the iPhone shipments are likely to decline significantly in the short-term due to the COVID-19 pandemic, that revenue loss will be offset somewhat by a steady stream of subscription sales that will help Apple to reduce cash flow volatility.

2. Microsoft is trading 21% below record highs

Shares of Microsoft (NASDAQ:MSFT) are currently trading round $160, which is about 16% below record highs. The tech giant pays annual dividends of $2.04 per share, indicating a forward yield of 1.28%. While this yield may not be too attractive, Microsoft stock has returned close to 400% since the start of 2010.

Microsoft is another company with a market cap valuation exceeding $1 trillion (currently $1.2 trillion), but it continues to increase sales by a double-digit percentage. In the December quarter, Microsoft sales were up 14% compared to an even more impressive earnings growth of 37%. Company sales have increased from $96.7 billion in 2017 to $125.8 billion in 2019. 

Microsoft's stellar top-line growth has contributed to an increase in the company's free cash flow metrics, which has helped it increase dividend payments for 16 consecutive years. The annualized dividend growth in the last three years stands at 8.7%.

Like Apple, Microsoft has also revised its guidance lower for the upcoming quarter, as COVID-19 is likely to affect its top line. Microsoft has forecast weaker sales in the Personal Computing segment driven by tepid sales of its Windows software. However, the tech heavyweight remains confident about its other business segments.

Microsoft has a cash balance of $134.2 billion, a debt balance of $87 billion, and operating cash flows of $54.1 billion. Its payout ratio is also low at 36%, giving it plenty of room to increase dividends in the coming decade.

The word Dividends with figures of people reading charts and using laptops

Image source: Getty Images.

3. Verizon: A recession-proof company

The telecom industry is generally recession-proof. Data usage is almost an essential utility service, making companies such as Verizon (NYSE:VZ) an ideal pick in this uncertain environment.

Shares of the telecom giant are down 11.4% year to date, and the stock is currently generating a forward dividend yield of 4.5%. Verizon has a payout ratio of just under 50%, and the company has increased its dividend payout for 15 consecutive years.

According to Yahoo Finance data, analysts expect Verizon earnings growth at 2.5% in 2020 and 4.1% in 2021, making its forward price-to-earnings multiple of 10.5 extremely attractive to value investors.

Consumers might delay the purchase of non-essential products, but are unlikely to cancel their mobile service. The upcoming transition to 5G will be a key driver of revenue growth, which will also help the company generate stable cash flows for the next few years.

The verdict

Apple, Microsoft, and Verizon will likely remain volatile stocks in the near term as investors try to analyze the effect of the coronavirus on company financials. However, these three tech behemoths have massive cash reserves, strong balance sheets, robust cash flows, and low payout ratios, which will not only help them navigate this uncertainty but also allow them to continue paying dividends in the future.