Many tech stocks are known for being high-growth, which usually means they don't pay dividends because they need to reinvest profits to keep growing at above-average paces. However, some tech stocks give you the best of both worlds: high-growth potential and dividends.
If you're looking to add some income-producing tech stocks to your portfolio, here are three to consider for March.
1. AT&T
It's been a rough past five years for AT&T (T 1.88%) and its stockholders, with the stock down close to 33% during that span. Luckily, it seems the company is taking the right steps to get back on track. While many stock prices were slashed in the past 12 months, AT&T managed to be up over 4%.
Most people don't invest in AT&T expecting outsized stock price gains, though. It's all about the dividend. After AT&T spun off its WarnerMedia business last year, it was forced to cut its dividend in half. Still, at $1.11 per share, it's one of the better dividend options in the stock market. Especially considering its trailing dividend yield (the average dividend yield over the past 12 months) is over 5.7%.
AT&T added around 656,000 postpaid phone customers in its fourth quarter of 2022, compared to Verizon Communications, which only added 217,000 in its Q4. Excluding the financial impact of separating its U.S. video segment, AT&T's revenue grew by 2.1% year over year in 2022. Not jaw-dropping by any means, but a good sign for a company that's had negative year-over-year quarterly growth in 12 of its last 14 quarters.
Telecom services have become a necessity in American life. From the phone you may be reading this article on to the Wi-Fi and broadband you're likely using to the satellites powering GPS, there's no real escape. People and businesses rely heavily on telecom services for daily life. Operating in an indispensable industry puts AT&T in a great long-term position.
2. Taiwan Semiconductor
As the world's largest chip foundry, Taiwan Semiconductor (TSM -0.34%) (TSMC) is in a unique yet lucrative position. Instead of making cookie-cutter microchips for general sale, TSMC makes customized microchips used by major tech companies in all sorts of products. From phones to tablets to laptops, there's a good chance an electronic device you own contains microchips manufactured by TSMC.
Since 1994, TSCM posted a revenue compound annual growth rate (CAGR) of 18%, and the company expects a CAGR of 15% to 20% until 2026. Although the cyclical semiconductor industry will likely decline in 2023 because of macroeconomic conditions, this shouldn't be viewed as anything more than a slight bump in the road for long-term investors.
The global semiconductor industry is projected to be a trillion-dollar industry by 2030 (it was around $600 billion in 2021). If TSMC manages to grow relatively close to the pace of the industry -- which it should, given its market share -- it should be in a great position to get a piece of the ever-growing pie. That's also music to the ears of the company's investors.
TSMC's trailing-12-month dividend yield is just over 2%, which isn't impressive by any means but is still respectable for a company growing at TSMC's pace. Since the company started paying a dividend in 2004, it's never reduced it.
3. Cisco Systems
Cisco (CSCO 0.06%) is a networking giant that's managed to become a top player in its field. But like many other tech stocks, it's been rough for the stock post-2021. Its stock price is down more than 20% from its December 2021 highs. Still, the company managed to put up impressive financials, bringing in $13.6 billion in revenue (up 7% year over year).
Cisco is often susceptible to macroeconomic conditions because companies buy less expensive hardware when money is tight. However, the company has been making efforts to transition its business model to one that relies more on recurring revenue from software and services instead of higher-ticket hardware sales.
In its second quarter of fiscal year 2023, Cisco's annualized recurring revenue was up 6% year over year, software revenue was up 10% year over year, and software subscription revenue was up 15% year over year.
With a forward price-to-earnings ratio hovering around the 13 to 14 range, Cisco is relatively cheap. This is especially true for long-term investors who can stomach the turns the company will likely face, given broader economic conditions.
Cisco's annual dividend is $1.56 per share, with a trailing-12-month yield of just above 3%. And with strong cash flow and around $22 billion in cash and short-term investments, there's no reason to believe the company won't continue to increase its dividend yearly as it has every year in the 12 years it's been paying it.
