Artificial intelligence (AI) is the biggest secular growth trend today. The global AI market will soar from $189 billion in 2023 to $4.8 trillion by 2033 -- a 25-fold increase in a decade -- according to a recent projection by the United Nations Conference on Trade and Development.
As with technology stocks in general, the vast majority of stocks that could be considered AI stocks either do not pay dividends or pay very small ones.
While they are relatively rare, there are some top-performing AI stocks that pay decent dividends and have a good dividend payment history. These include the world's largest semiconductor (or "chip") foundry Taiwan Semiconductor Manufacturing Corp., or TSMC (TSM +0.18%), and International Business Machines, or IBM (IBM 2.55%), one of the world's oldest large tech companies.
So, folks who like dividend-paying stocks and want to invest in AI -- forgive the cliché -- can have their cake and eat it too.
Image source: Getty Images.
2 Top AI stocks that pay decent dividends
|
Company |
Market Cap |
Dividend Yield |
Forward P/E Ratio |
Wall Street's Projected Annualized EPS Growth Over Next 5 Years |
5-Year Return |
|---|---|---|---|---|---|
| Taiwan Semiconductor Manufacturing |
$963 billion | 1.26% | 24.2 | 22.7% | 296% |
| IBM | $270 billion | 2.31% | 26.7 | 6.3% | 223% |
|
S&P 500 |
N/A | 1.24% | N/A |
N/A | 112% |
Data sources: Finviz.com and Yahoo! Finance. P/E = price to earnings. EPS = earnings per share. Data as of July 8, 2025.
TSMC: The world's largest chip foundry
Taiwan Semiconductor Manufacturing produces chips for companies that contract out all or some of the manufacturing of chips that they design. As the world's largest chip foundry, TSMC is the dominant company in the production of advanced AI chips, so it's been significantly benefiting from the growth of the AI market and should continue to benefit.
TSMC's customers includes most of the big names in chip companies -- such as Nvidia, Broadcom, and Arm Holdings. It also produces chips for big tech companies that have designed their own chips, including Apple, which is widely considered TSMC's largest customer, followed by Nvidia.
NYSE: TSM
Key Data Points
The company is off to a great start in 2025. In the first quarter, its revenue jumped 35% year over year to $25.5 billion, driven by continued strong AI-related demand. Better yet, its EPS surged 54% to $2.12. Its EPS growing faster than its revenue reflects its expanding profit margin.
On the Q1 earnings call, management reaffirmed its 2025 guidance that its revenue from AI accelerators will double year over year.
TSMC started paying cash dividends in 2004 and has never halted or reduced its dividend per share.
TSMC stock is trading at 24.2 times its forward projected EPS, which is reasonable for a stock of a company that Wall Street expects will grow EPS at an average annual rate of nearly 23% over the next five years.
IBM: Successfully transitioning to AI and other high-growth markets
IBM has been in a years-long transitioning mode, divesting of legacy businesses and investing in growth markets, notably cloud computing and AI. This transitioning resulted in its revenue declining, which in turn caused its profits and cash flows to also decrease. But Big Blue is back in growth mode.
In 2024, IBM's revenue increased 3% in constant currency to $62.8 billion, driven by a 9% rise in software revenue, offset by declines of 1% and 3% in its consulting and infrastructure segments, respectively. Adjusted earnings per share (EPS) from continuing operations was up 7% year over year. Free cash flow (FCF) rose 13% year over year to $12.7 billion.
NYSE: IBM
Key Data Points
IBM's generative AI book of business ended the year at $5 billion inception to date. (Generative AI enables users to quickly generate new content based on a variety of inputs. It's the type of AI that's largely powering the AI boom.)
The AI business is growing fast, increasing $2 billion from the third to the fourth quarter 2024. Moreover, it tacked on another $1 billion-plus in the first quarter of 2025 to bring its total to more than $6 billion. About one-fifth of this business comes from software and four-fifths from consulting, CEO Arvind Krishna said on the Q1 earnings call.
The company expects revenue growth to accelerate in 2025. For the year, it guided for annual revenue growth of at least 5% in constant currency and FCF of about $13.5 billion, or over 6% growth year over year.
IBM has a great dividend history. It's increased its quarterly cash dividend for 30 consecutive years.
IBM stock is trading at 26.7 times forward projected EPS. This might seem quite pricey for shares of a company that Wall Street expects will grow EPS at an average annual pace of 6.3% over the next five years. However, investors can expect to pay a premium for stocks of companies that have great track records of raising their dividends.
Moreover, the stock might turn out to be less pricey than it currently seems. IBM has solidly beat the analyst consensus estimate for earnings in the last four quarters, with two of the beats being quite large. Given how fast the company's AI business is growing, it could continue to solidly surpass earnings estimates.
Mark your calendars
TSMC is slated to release its Q2 2025 results before the market open on Thursday, July 17.
IBM is scheduled to release its Q2 results after the market close on Wednesday, July 23.
