3 Top Dividend Growth Stocks I'm Buying to Close Out 2022

Many investors don't start with the tech sector when searching for top dividend stocks. But after the market took a beating in 2022, things have changed. As stock prices have fallen, quality tech company stock dividend yields have been pushed higher. Despite the bear market, computing technology is still growing, offering a potent combination of current dividend income with the potential for growth and higher dividend income payments in the future.

As 2022 comes to a close, Apple (AAPL 0.51%), Qualcomm (QCOM 1.62%), and Broadcom (AVGO 1.64%) top my list of dividend growth stocks I'm buying right now. Here's why.

Apple: Don't let size hold you back from owning more of this tech leader

For much of 2022, Apple held up quite well. But in recent months, the bear market caught up with the iPhone maker too. Shares are down nearly 26% with just days left to go until the new year.  

That spells an opportunity for investors with cash to deploy, because Apple's business is just fine. Sure, there's worry about supply chain issues (the recent social upheaval in China at key Apple supplier Foxconn) as well as the effect on demand as COVID-19 cases surge (again in China). There's also underlying weakness among consumers headed into 2023 as inflation begins to affect consumer spending. A high-priced smartphone might be tough to justify for many households next year.

Now don't get me wrong, the business itself could be in for a rough patch as 2023 gets underway. The iPhone has remained the primary growth driver of the business in recent years as customers upgrade to a 5G network-ready model -- which, not incidentally, have tended to carry heftier price tags. With demand sky-high, Apple's problem has been getting enough iPhones out on the market. This constricted supply could continue to bode well for iPhone sales long term, but Apple's suppliers might not be able to get enough of them shipped out the factory in the coming months. If they can't, flatlining iPhone sales could justify the recent tumble in Apple stock.  

Nevertheless, Apple is still working on new innovations, like a mixed-reality headset that could be unveiled in 2023. And Apple remains wildly profitable and able to continue funding its rising dividend (currently yielding 0.7% a year) plus a massive amount of share repurchases ($89 billion in the last year alone, which equate to 4.2% of the current market cap if you're looking for a dividend yield equivalent on stock buybacks). At 19.5 times one-year-forward expected earnings, Apple looks like a timely purchase right now.

Qualcomm: Slumping Android sales won't last forever

While the iPhone has continued to win over new customers and has been picking up market share as of late, Android devices have been suffering. Companies involved with the manufacture of Android (which accounts for over 70% of mobile devices globally) are anticipating a sharp decline in smartphone sales at the end of 2022 and well into 2023. One of those key Android suppliers is Qualcomm.  

Qualcomm had a superb fiscal 2022, growing total revenue by 32% year-over-year to $44.2 billion. However, to kick off fiscal 2023, management expects revenue to fall as much as 14%. Android ecosystem supply chains have begun to loosen up just in time for consumer spending to hit the skids, so an excess of inventory suddenly needs to be burned off. That means falling profit margins for Qualcomm, and this unfortunate confluence of events could last for a couple quarters. The average analyst on Wall Street is anticipating Qualcomm's earnings will fall somewhere in the mid-20% range in 2023.

While my own estimate agrees with this consensus outlook for the next year, I think the market is highly myopic with the sell-off in Qualcomm stock. Shares currently trade for just 13 times 2023 earnings per share (assuming a 25% decrease from earnings per share of $11.37 generated in 2022).

Eventually, smartphone sales will bottom and pick up again. And much like Apple, the steady migration over to 5G bodes well for Qualcomm as it means higher selling prices (and more profit) per chip. The company is also investing heavily to broaden its chip portfolio in automotive solutions, virtual reality, laptops, and the like. Qualcomm's dividend currently yields 2.7% a year, and nearly $2.8 billion worth of stock was repurchased in the last year as well (about 2.3% of the current market cap). With the market down on Qualcomm, this looks like another timely dividend growth stock purchase.

Broadcom: The private equity-like chip stock few investors know about

Few investors know much about Broadcom, but it's no less a semiconductor industry giant. Though not a household name like Qualcomm and its Snapdragon processors, its designs can be found all over smartphone and mobile devices, powering things like touch displays and 5G and WiFi radio signal receivers. But the real bread-and-butter for Broadcom lies behind the scenes. Broadcom dominates in chips and switches for data centers, enterprise computing systems, and broadband internet infrastructure.  

The company has patched its portfolio together over the years with numerous acquisitions. It targets niches within the computing world where it can dominate and turn an abnormally high profit, and will exit a business once a high-profit-margin profile can no longer be met. It's a controversial strategy, and one that has led to some antitrust scrutiny over the years. Nevertheless, if growth and income is what you're after, Broadcom stock fits the bill. 2022 revenue was up 21% year-over-year to $33.2 billion, and free cash flow was a whopping $16.3 billion.

Broadcom has used this cash to pay a steadily rising dividend, which was just increased 12% last quarter and currently yields 3.3% a year. Additionally, share repurchases are also a frequent feature of this company. Management repurchased $8.3 billion in stock in the last year (3.6% of the current market cap).

Broadcom is hoping to make another big splashy acquisition next year with the pending purchase of VMware (VMW). The company hopes to merge it with its existing enterprise software business to create a challenger to public cloud giants Microsoft (MSFT 0.46%) Azure and Amazon (AMZN 1.49%) AWS. However, given the size of the proposed merger, antitrust regulators are taking a critical look. Nevertheless, with or without VMware, Broadcom is a top dividend stock to consider adding to a portfolio. Shares trade for under 13 times one-year-forward expected earnings per share as of this writing.