3 Dividend-Paying Tech Stocks to Add to Your Portfolio
With the current market uncertainty, it is time to take a look at dividend stocks. Here is a list of 3 tech stocks that pay dividends.
July 13, 2022

Rising interest rates, inflation, and recessionary fears are not good indicators of a strong and healthy market. The tech-heavy NASDAQ Composite index (INDEX: COMP) is down 28.21% so far this year, showing the poor performance of tech stocks compared to other industries. However, not all tech stocks are the same.

We have compiled a list of three tech stocks that pay good dividend yields and have a history of increasing their dividends, making them ideal for investors looking to grow their income. 

International Business Machines Corporation (IBM)

IBM (NYSE: IBM) is an IT company that operates through four segments: Cloud and Cognitive Software, Global Business Services, Systems, and Global Financing. The company was incorporated in 1911 and started paying dividends in 1913. 

Between 2021 and 2000, IBM grew its annual dividend per share at a compound annual growth rate (CAGR) of 12.93%, from $0.51 to $6.55. This is significantly higher than the 7.45% CAGR generated by the S&P 500 index (NYSEARCA: VOO) over the past 20 years, making it great for investors looking for a dividend growth stock with low volatility. 

However, since 2017, IBM's revenue has fallen by 27.5%, while net income remains at the same level. This shows the company's financial strength and that it can maintain profits even as revenues have been badly beaten. At the time of writing, IBM paid a respectable dividend yield of 4.70%. 

Cisco Systems, Inc.

Cisco Systems, Inc. (NASDAQ: CSCO) is engaged in the design and selling of a range of technologies across networking, security, collaboration, applications, and the cloud.

Cisco has been paying dividends for a significantly shorter period than IBM, with dividend payments starting in 2011. Since then, the company's dividends per share have increased at a CAGR of 19.95%, from $0.24 to $1.48 in 2021. Once again, this growth rate significantly outperforms the returns of the S&P 500 index, making it a good investment for those looking to build strong cash returns. 

Unlike IBM, Cisco has seen its revenue and net income rise from 2017 to pay for the rapidly growing dividends. Revenue increased by 3.78% between 2017 and 2021, while net income grew by 10.22%. This growth is vital to sustainably increase dividend payments without tapping into the company's cash pile. At the time of writing, Cisco paid a dividend yield of 3.50%, this is likely high due to its falling share price this year. 

Broadcom Inc.

Broadcom Inc. (NASDAQ: AVGO) designs, develops, and supplies a range of semiconductor and infrastructure software solutions. Its semiconductor solutions segment includes semiconductor solution product lines and internet protocol licensing. Broadcom's infrastructure software segment includes its mainframe, distributed and cyber security solutions, and its fiber channel storage area networking business.

Like Cisco, Broadcom only started paying full-year dividends in 2011, when it paid $0.40 per share. Since then, payments have grown at a CAGR of 43.59% to $14.90 in 2021. This makes the company the best dividend payer on the list. Broadcom also has the most sustainable dividend due to its much higher revenue and earnings growth rates when compared to IBM and Cisco. 

Between 2017 and 2021, Broadcom's revenue grew by 55.6% to $27.45 billion. Net income increased almost fourfold from $1.69 billion to $6.74 billion allowing the company to return cash to shareholders while also building up cash reserves. Broadcom has a dividend yield of 3.29%, likely due to its falling share price.

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