Generally, the emphasis is on growth with tech companies, and therefore, many will reinvest all their profits to fuel that. However, there are some big-name exceptions that have managed to find the balance between prioritizing growth as well as being shareholder-friendly with dividends.
For investors looking to invest in tech companies that offer both growth potential and consistent dividend income, look below.
1. Taiwan Semiconductor Manufacturing
Taiwan Semiconductor Manufacturing (TSM 1.26%), or TSMC, is the global leader in chip manufacturing, having introduced the foundry model. Instead of making generic chips to sell, TSMC makes specialized chips for specific companies' products. These products include smartphones, car information and entertainment systems, GPUs for data centers, and hundreds more.
It's been rocky for the company as a weaker economy slowed sales, but its future might have been solidified with the emergence of AI and the role the chipmaker can play. TSMC itself won't be at the forefront of AI, but the companies relying on its chips will be.
Consider the following ripple effect. Companies dealing with AI need tons of data and this large amount of data is stored in data centers. Data centers are powered by GPUs, which rely on TSMC's chips. According to research by Next Move Strategy Consulting, the AI chip market could be valued at around $304 billion in 2030. That's more than 10 times its 2022 value of $28.8 billion.
TSMC's quarterly dividend is $0.46, with a trailing-12-month yield of just under 1.9%. Not bad for a company that's managed to more than double in value over the past five years.
2. Microsoft
There are veterans in the tech world, and then there's the veteran, Microsoft (MSFT 1.82%), which began in 1975. It has been there every step of the way in the tech evolution, and it's not going anywhere, either. It's too much of a staple in the business world at this point.
In the past five years, Microsoft's revenue grew more than 68%, no small feat for a company of its size. In its fiscal 2023 (ended June 30), it made $211.9 billion in revenue, up 7% year over year.
Data by YCharts.
Numbers aside, what's impressive about Microsoft is the diversity of its revenue streams. Part of sustaining success is not being too reliant on too few products or services, and it exemplifies that more than any other big tech company.
Case in point: Microsoft managed to put up impressive fiscal 2023 numbers despite its More Personal Computing segment -- which includes the Xbox, Windows devices, Windows commercial products, and more -- being down 4% year over year.
Some economic conditions can be damaging to a company's financials if it directly affects one of the business' segments, products, or services. For example, think about what would happen to Alphabet if suddenly Google's advertising revenue was drastically reduced. You won't have those problems with Microsoft.
A 2023 stock price rally has lowered Microsoft's dividend yield, but it's a case of the best of both worlds. The company presents great growth opportunities to go along with its $0.68 quarterly dividend.
3. Cisco Systems
Cisco Systems (CSCO -0.50%) is another staple in the tech world, playing a pivotal role in shaping the internet infrastructure as we know it. With Cisco's routers, switches, data center supplies, and much more, the connectivity we often take for granted would likely be lagging.
In its third quarter (ended April 29), Cisco made $14.6 billion in revenue, up 14% year over year. It sells hardware and services, and hardware is undoubtedly its cornerstone, accounting for over 76% of revenue.
Cisco has dominated its market for decades with hardware that's top of the line. This quality gives it good pricing power and customer loyalty since cheaper alternatives can need constant fixing that eventually becomes expensive.
The company started paying a dividend in 2011 and has increased it every year since. Its current quarterly dividend is $0.39, with a trailing-12-month dividend yield of just over 2.9%. Given Cisco's finances, there's no reason to think it'll stop increasing its yearly dividend anytime soon.
