"Tech stocks" is not as accurate a descriptor for a company as it used to be because it can be hard to find a company these days that doesn't employ technology in some way to carry out its business. Airplanes, for example, are roughly 50-ton to 100-ton flying hunks of technology, while financial services companies almost exclusively rely on tech to process transactions and manage money. Cybersecurity, artificial intelligence, data analytics, and more are vital parts of many, if not most, industries these days.
So if you're looking for tech stocks to invest in to build wealth for retirement, you've got lots of options, perhaps even too many to narrow your choices adequately. To help you, here are three tech stock candidates to consider for your portfolio. Each is heavily involved in computing hardware and/or software and each has the potential to make you rich in retirement.
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1. Adobe
Adobe's (ADBE 0.97%) market cap hovers around $200 billion, it rakes in around $16 billion in revenue annually, and it employs roughly 26,000 people globally. You might know it for its flagship Photoshop software -- used by more than 90% of creative professionals, according to the company -- but there's much more to Adobe these days.
Adobe Stock is a repository of more than 290 million photos, videos, illustrations, and more that it licenses for use in multiple ways. Adobe is also the home to PDFs, and more than 300 billion of them were created last year. Meanwhile, Adobe facilitates digital signatures via its Adobe Document Cloud, which is used by most Fortune 100 companies.
The company has many irons in the fire and is well-positioned to profit as cloud-based systems proliferate. Its stock, meanwhile, isn't exactly dirt-cheap but it has recently been sporting P/E ratios, a price-to-sales ratio, and a price-to-cash-flow ratio well below their five-year averages, suggesting it's attractively priced.
2. Digital Realty Trust
Digital Realty Trust (DLR 0.96%) is a real estate investment trust (REIT) -- which means the special tax structure it operates under requires it to return at least 90% of taxable earnings to shareholders, typically through dividends. The stock's dividend recently yielded an appealing 3.35% -- and it has been increased at an average annual rate of about 5.6% over the past five years.
REITs are a way to invest in real estate without buying actual real estate properties. They're companies that themselves buy a lot of real estate to rent out, collecting income via leases. Many REITs focus on one or a few real estate sectors, such as medical buildings, retail outlets, apartments, industrial sites, storage units, and so on. Digital Realty Trust has an especially attractive focus: data centers.
Cloud computing services sound like they store data up in the sky somewhere, but they actually stored it in special warehouses full of servers called data centers spread around the country (and the world). Digital Realty Trust recently boasted more than 280 data centers in almost 50 metropolitan areas in some 25 countries across six continents. The company has been growing briskly, and still has plenty of room for further growth, in part via international expansion.
Chief Executive Officer A. William Stein noted in February: "Digital Realty delivered record bookings in the fourth quarter and for the full year, with over $500 million of new business globally in 2021, demonstrating the strength of our global value proposition. ... Demand for data center solutions remains robust, and we are investing organically as well as strategically to expand our global platform to provide customers the capacity and communities they require to execute their digital transformation strategies around the world."
3. Microsoft
Then there's Microsoft (MSFT 2.43%). It's long been known as a tech giant in software and products, but you might not be aware of how much is going on under the company's roof. There's the software side with the dominant Windows computer operating system and Microsoft 365 suite of productivity software. Microsoft also operates the Azure cloud-computing platform, builds various Surface touch-screen computing devices, sells Xbox gaming systems, and it even owns Skype and LinkedIn. Better still, it has been shifting to a subscription model with many of its offerings such as Office and Xbox, and that provides recurring revenue, favored by many investors and companies.
Microsoft has been a terrific growth stock, and it is a dividend-paying stock with a yield of 0.88%. That may not be super impressive, but the company's payout has been increasing at an average annual rate of about 9.7% over the past five years. Those buying now can expect larger distributions in the future.
Despite having a recent market valuation topping $2 trillion, Microsoft is still growing at a respectable clip, with its fiscal second-quarter (ended Dec. 31, 2021) revenue up 20% year over year and net income up 21%. Its cloud service is growing faster than the overall company, and it's bolting on some acquisitions to further growth, too -- such as its planned purchase of Activision Blizzard.
These attractive tech stocks have much promise and can help grow your retirement portfolio powerfully. Take a closer look at any that interest you.
