While many high-flying tech stocks don't pay dividends at all, investors can still find attractive dividends within the tech sector. International Business Machines (IBM 1.39%) and AT&T (T 0.12%) are two great examples. On top of solid dividends, both IBM and AT&T have been delivering impressive gains to investors over the past few years. While the past doesn't predict the future, these two dividend stocks look attractive for long-term investors.
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IBM
Shares of IBM have more than doubled over the past three years as the company's long-awaited turnaround finally materialized. IBM's bet on hybrid cloud computing, anchored by its acquisition of Red Hat and progress in artificial intelligence (AI), have led to consistent revenue and free-cash-flow growth. For 2025, the company expects to grow currency-adjusted revenue by at least 5% while producing around $13.5 billion in free cash flow.
AI is turning into a big win for IBM. The company's dual focus on software and consulting is winning over enterprises, resulting in $6 billion in generative AI-related bookings so far. IBM's watsonx platform and its efficient Granite AI models are geared toward solving real-world problems for enterprise clients, and its consulting arm can construct AI solutions involving IBM and third-party products.
IBM has kept dividend increases small in the wake of the $34 billion Red Hat deal. The latest dividend hike was just a penny, bringing the quarterly dividend up to $1.68 per share. Even so, IBM's dividend looks attractive, with a yield of around 2.3%. The company's dividend track record is tough to beat. As of this year, IBM has paid consecutive quarterly dividends since 1916, and it's increased that dividend annually for 30 years in a row.
With free cash flow on the rise, IBM's dividend is set to consume less than half of the company's free cash flow in 2025. That leaves plenty of cash flow left over for debt reduction and other uses, and if free cash flow keeps growing, larger dividend hikes could be on the horizon.
AT&T
Since bottoming out in mid-2023, shares of telecom giant AT&T are up around 110%. While investors had shunned the stock for years following the company's failed media acquisitions and messy disposal of those assets, they've been warming back up to AT&T recently.
Today, AT&T is focused on 5G wireless and fiber. The company has delivered consistent wireless subscriber growth over the past few years, and its fiber network is set for a major expansion. AT&T recently passed its 30 millionth fiber location, and it expects to double the network's reach by the end of 2030. The recent acquisition of Lumen's Mass Markets fiber business will help the cause.
For 2025, AT&T expects mobility service revenue to grow by around 3%, consumer fiber revenue to surge by a mid-teens percentage, and free cash flow to top $16 billion. That free cash flow supports AT&T's dividend, which has become more sustainable as the company's results have improved.
AT&T slashed its dividend when it spun off WarnerMedia, and it has kept its dividend payments unchanged since then. The current quarterly dividend is $0.2775 per share, which works out to a dividend yield of 3.8%. AT&T will pay out around $8 billion in dividend payments this year, or roughly half of its free cash flow.
While AT&T's dividend hasn't increased in years, a higher dividend could be coming soon. The company hit its debt-reduction goals this year and plans to resume share repurchases in Q2. With less focus on debt reduction, a dividend increase could also be on the table.
For investors looking for a safe dividend with a high yield, AT&T is a great choice.
