Dividends are great tools for investors and can be even more helpful during volatile market periods like this one. Not only are dividends yours once they pay out, but you can reinvest them in more shares to compound your gains.
But dividends come in all different shapes and sizes, so what appeals to Jack might not fit Jill's investment strategy. Here are three very different dividend-paying tech stocks with stellar fundamentals you can count on.
1. The high-yielding appeal of AT&T
Some income investors simply want the biggest yields they can possibly get from their dividend stocks, and telecommunications giant AT&T (T -1.21%) is an excellent stock for achieving that. AT&T is the largest U.S. wireless carrier in the U.S., with 44% of the market. Telecom companies are essentially utilities -- customers generally prioritize paying their bills each month, and as our reliance on smartphones is only increasing, that is unlikely to change.
AT&T had a rough decade, taking on debt to try and acquire its way into the entertainment industry. However, it didn't work and the company ditched those assets and cut its quarterly dividend from $0.52 to $0.278 to free up more cash to pay down debt. Despite that, the dividend still yields 7% today. In some cases, such high yields can mean the market is skeptical about the company's ability to maintain its payouts at their previous levels. Fortunately, AT&T's distributions now appear safe; its dividend payout ratio is a manageable 67%.
The stock is down 24% over the past year, probably because of the company's high debt load during a period of rising interest rates. Nobody can know for sure, but AT&T's dividend payout now appears secure, barring an unforeseen collapse in the business. The business looks very healthy, considering that AT&T added roughly 1.6 million net wireless customers through the first half of 2022.
2. Broadcom offers the best of both worlds
It's great when a company can pay a solid dividend and grow it over time -- find those stocks and hang onto them! Semiconductor and software company Broadcom (AVGO 1.64%) is a great example. It pays a dividend that not only yields 3.5% at today's share price, but has also grown an average of 35% annually over the past five years.
The company makes semiconductors used in personal electronics, factory automation, networking, and broadband, among other applications. It has also built an infrastructure software business through large acquisitions over the past several years, which could help make Broadcom a more consistent company over the long term.
Those acquisitions, including a pending $61 billion cash-stock deal for VMware, could push Broadcom to slow its dividend growth. However, investors likely have no reason to fear a dividend cut. Its current payout ratio is just 45% of cash flow.
3. Amphenol will show you the growth
Electronic component manufacturer Amphenol's (APH 1.53%) dividend won't blow you away at first glance. The stock yields just under 1.2%. But what it lacks in yield, it makes up for with growth. The payout has grown by an average of 28% annually over the past decade. That means the dividend amount you receive doubles every three years, which can add up quickly if you're a long-term investor.
The company manufactures and sells various types of connectors, sensors, and other electronic components used in a wide range of industries worldwide. Amphenol has averaged 11% top-line growth over the past decade while converting nearly $0.11 of every dollar of revenue into free cash flow. The result has been steadily growing profits that fuel sizable dividend increases. Notably, its dividend payout ratio is minimal at just 30%, leaving room for growth.
Once again, the bear market is dragging down a quality stock: Amphenol has fallen by 20% since January. However, the business is doing well. Its revenue grew 18% year over year in the second quarter, and analysts believe earnings per share will increase by an average of 11.5% annually over the next three to five years. Amphenol's steady double-digit percentage growth could be an excellent wagon for investors to hitch their portfolios to.
