Most people hear the phrase "technology stocks" these days and immediately think of volatile, rapid-growing investments suitable only for the boldest investors. But this description paints with too broad a brush! There are several established tech stocks that not only grow but are also profitable and pay dividends to their shareholders, rewarding them for owning stock in the business.
Finding them does require some searching and some research and I can help with that. Here are three dividend-paying tech stocks that have industry-leading businesses in their respective specialties. Long-term investors might want to consider them as potential additions to their portfolios.
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1. Apple
There's an investing adage that says, "Start by investing in what you know." Technology giant Apple (AAPL 0.62%) is a stock that most people are very familiar with. An estimated 1.65 billion people worldwide use Apple devices; its phones, computers, watches, and various services regularly touch consumers' daily lives.
This dominance and brand recognition has created one of the largest companies in the world, with annual revenue of more than $365 billion. Apple converts roughly 25% of its revenue into free cash flow, making it a powerful cash-generating machine. The company returns a lot of it to shareholders in the form of stock buybacks ($85.5 billion in 2021 alone). But it also distributes dividends ($0.88 per share in 2021), and management has raised the payout the past nine years at an average increase of 9.4% annually. The dividend itself yields 0.5% at the current share price.
Dividend investors might scoff at the low dividend yield, but part of the reason for that low yield is the significant growth Apple still generates despite its massive size which has led to outsized stock price appreciation. Revenue growth has averaged 15% per year over the past three years, while earnings per share have outrun it, averaging 23.5% growth per year thanks to stock buybacks. Apple is a total package and fits in just about any long-term portfolio.
2. Verizon
Another company you've probably heard of is telecom giant Verizon Communications (VZ 0.15%). It's one of only a handful of wireless telecom companies in the U.S., and the massive network infrastructure built over decades with billions of dollars of investment has built quite the competitive moat. It simply doesn't make sense for a new competitor to spend the time and money to try to penetrate the wireless industry.
Cell phones have effectively become a utility and their importance makes Verizon's business reliable in almost any economic scenario, ensuring steady monthly income. That steady cash generation has helped the company pay a steady dividend. Verizon's stock price has been relatively flat over the past five years. Couple that with steady dividend increases and the yield now tops 5% at the current share price, which gives investors a healthy dose of income for holding shares.
Verizon hasn't traditionally been a fast-growing company; management has raised the payout for the past 17 years, but the average yearly raise has amounted to just over 2% over the past five years. The company could see an uptick in growth as 5G rolls out and becomes more central to the economy. New technologies like autonomous driving, streaming, and connected devices (IoT -- internet of things) could increase the demand for network services.
3. Intel
An increasingly digital world means more components are needed to power the computers and devices that make things work. Chipmaker Intel (INTC 0.85%) is a titan in the industry, inventing the x86 CPU chip architecture used throughout the world today. The industry has become increasingly competitive, but Intel still produces about 65% of x86 chips in circulation.
This long-standing success has made Intel one of the largest tech companies globally; its stock has a market cap of almost $200 billion, and its revenue totaled $79 billion in 2021. Intel generated $11.3 billion in free cash flow in 2021, some of which went to investors as dividends. The company has increased its payout for the past seven years, raising it an average of 6.2% annually over the past five years. Investors can get a solid 3% dividend yield at the current share price.
There's currently a shortage of semiconductor chips, and Intel is taking advantage of the challenge by investing heavily into becoming a leading chip manufacturer. It's spending $20 billion to build two chip factories (called "fabs") in Ohio and another $20 billion to expand capabilities in Arizona. This will make Intel the leading U.S. chip producer by a wide margin, which could invite growth opportunities from working more closely with the government and other U.S. businesses.
