3 Dividend-Paying Tech Stocks to Buy in January

When many people think of technology companies, they think of growth stocks. This makes sense, considering that many of the best growth stocks over the past few decades have been technology companies. However, many technology companies can also provide stable income through dividends.

Many large technology companies are cash cows, meaning they can reward shareholders in addition to rising stock prices (which are not guaranteed). If you’re looking for dividend-paying technology stocks, these three are better-than-average yielding options.

1. International Business Machinery

international business machine (IBM -1.06%), better known as IBM, has been a tech giant in its own right for some time, although it doesn’t get as much attention as the “Magnificent Seven” stocks. Artificial intelligence (AI) will become mainstream in 2023, but IBM has been one of the pioneers of this technology since the 1950s.

IBM’s quarterly dividend is $1.66, giving it a trailing 12-month yield of approximately 4.4%. This figure is approximately three times higher than the previous quarter. S&P 500 During that period. IBM has increased its annual dividend for 28 consecutive years, and there’s no reason to believe that will change any time soon. Free cash flow is sufficient to cover dividend obligations.

IBM Cash Flow per Share (Quarterly) Data from YCharts

IBM’s stock finished 2023 up 14% but underperformed the S&P 500 by 9%. Part of the reason the stock has underperformed in recent years may be due to the company’s shift away from legacy businesses, such as on-premises products, to high-growth industries such as cloud and cybersecurity.

These changes are not the fastest and these high-growth areas are very competitive, but IBM is investing significantly to make them happen. In the meantime, profitable dividends will help investors be more patient while changes occur.

2. Cisco Systems

cisco systems (CSCO 0.02%) Networking hardware, including routers, modems, security products, and switches, has grown it into the $200 billion company it is today. Afterwards, the business area was expanded to include cloud services. internet of things (IoT) and cybersecurity industries.

Cisco’s year-over-year revenue growth slowed compared to previous quarters, but some of that may be due to enterprise customers deploying hardware more slowly than usual. If this happens, Cisco may not recognize the revenue (meaning it records it in its financial statements) until later quarters. During Cisco’s recent earnings call, CEO Chuck Robbins noted that the delay could impact the company’s earnings for “the next few quarters.”

Unlike many other large tech stocks, Cisco’s stock didn’t see explosive growth in 2023, growing just over 5%. Fortunately, there are above-average dividends that can pick up some of the slack. Cisco’s quarterly dividend is $0.39, giving it a trailing 12-month yield of just over 3%.

Cisco faces short-term challenges, but has an attractive dividend and low valuation (Forward price-to-earnings ratio 13) In the long run, the upside is much greater than the downside.

MSFT PE Ratio (Forward) data from YCharts.

3. Taiwan semiconductor manufacturing industry

Taiwan Semiconductor Manufacturing (TSM 0.48%) (or TSMC) is a global leader in semiconductor (chip) production. Its foundry model, which makes chips tailored to customers’ specific needs rather than selling them generically, has made the company one of the most important technology companies in the world. The client is: apologize (Iphone), nvidia (GPU), tesla (electric vehicle parts), and many other world-class companies.

TSMC’s quarterly dividend is $0.48 (considering exchange rates) and its yield is just over 1.9%. Considering TSMC’s stock price growth potential, it’s an above-average dividend yield that acts as a true two-for-one benefit. It has significantly outperformed the S&P 500 over the past decade, and its AI-driven uptrend will likely continue its upward trajectory.

TSM Total Return Level Data from YCharts

TSMC doesn’t deal directly with AI, but its chips are very important to many companies that do. Without TSMC’s chips, there is no advanced computing power. Efficient data processing is not possible without advanced computing power. Without efficient data processing, no AI exists today.

There are other semiconductor companies, but TSMC chips are ahead in terms of performance.

AI has not yet had a material impact on TSMC’s finances, and there is no way to say for sure what impact it will have. However, this is likely to be a good addition for companies that are integrated across a variety of industries.