3 Tech Stocks Dividend Investors Should Consider

In the post-financial-crisis world, investors have widely embraced the concept of dividend investing. Those quarterly dividend payments are real cash in your pocket, which is very valuable, especially when markets go south. What may surprise you is that the technology sector contains several great dividend stocks. This might seem counterintuitive, since technology companies traditionally were reluctant to pay dividends to shareholders, preferring instead to retain as much cash as possible to reinvest back into the business. But tech stocks can provide good dividends. Let's take a look at Intel (INTC 1.74%), Qualcomm (QCOM -0.85%), and Texas Instruments (TXN 0.01%).

Within the broad technology sector, the semiconductor industry is a particularly good source of dividend stocks. Semiconductor companies are involved in a wide range of chips and processors that are utilized across industries, including electronics, smartphones, and automotive.

Semiconductor stocks are processing big dividend yields

Intel's processors are utilized in personal computers, and it also generates revenue from data centers and the Internet of Things. Qualcomm's chipsets are used in millions of smartphones. For its part, Texas Instruments operates two core businesses, analog and embedded processing. More than 80% of Texas Instruments' revenue comes from these two business areas.

As you can see, each of these semiconductor stocks pays a solid dividend yield, which is based on the dividend and the share price. These yields compare very favorably to the broader stock market. The S&P 500 Index yields only around 2% now that it has rallied to record highs. And, with interest rates sitting at rock-bottom levels, you'll be hard-pressed to find high yields from bank products like certificates of deposit. This means that stocks are a good place to look for yield. 

Of course, when investing in individual stocks, it's important to remember the risks. Companies can only pay a dividend with the supporting underlying cash flow. That's why it's crucial to analyze a company's financial health before jumping in and buying the stock. Fortunately, each of these three stocks is in good financial shape.

The first way this is judged is through the payout ratio. This metric demonstrates how much of a company's profits are distributed to shareholders as a dividend. The lower the percentage, the less of a burden the dividend has on a company. Intel, Qualcomm, and Texas Instruments are in a comfortable position as far as dividend sustainability is concerned. In addition, their long-term debt-to-equity ratios are also low. This metric looks at a company's balance sheet by comparing its long-term debt that typically requires interest payments as a percentage of shareholder's equity. The lower the ratio, the more the business's assets are owned by shareholders and not creditors.

Good odds of high dividend growth
Each of these companies can pay high dividend yields and remain in good financial shape because of the strength of their businesses. Intel, Qualcomm, and Texas Instruments all generate solid free cash flow. In addition, their balance sheets are in good shape as well. Not only do they carry low levels of debt, each of these companies has billions in cash just sitting on the books. Intel has $8.7 billion in cash and investments. That figure stands at $32 billion for Qualcomm and $3.4 billion for Texas Instruments.

Due to the combination of a low payout ratio and strong balance sheets, there should be plenty of room for high dividend increases going forward. Intel, Qualcomm, and Texas Instruments will likely continue the trend of double-digit dividend raises each year. This means the potential income you can realize from investing in these three stocks is even more attractive than it seems.