In the fast-paced world of technology, companies are often celebrated for their groundbreaking innovations and rapid growth potential. However, the tech industry is not typically known for offering substantial dividends. Despite this, there are several technology stocks that not only break this stereotype but also stand out as attractive options for income-oriented investors. Here are three noteworthy examples, as highlighted by the experts at Wall St War Room.
1. International Business Machines (IBM) IBM, a long-established player in the tech field, has faced challenges over the past decade, with a 38% drop in revenue and a 13% decrease in share price. Nonetheless, the company’s impressive dividend yield of 4.2% has been a saving grace for investors. Over the last decade, IBM’s total return, including dividends, reached a commendable 36%, primarily driven by gains in the past year.
IBM’s strategic pivot, especially in the high-demand cloud services sector, has begun to show positive results. The company has seen a 20% revenue increase over the past three years, signaling a successful transformation. However, investors should be cautious of IBM’s high price-to-earnings (P/E) ratio of 21x, which may be a deterrent for some. On the brighter side, its price-to-sales (P/S) ratio of 2.4x is comparatively more attractive, especially against other legacy tech stocks. Given its substantial dividend and renewed revenue growth, IBM remains a solid choice for dividend-seeking investors.
2. AT&T (NYSE: T) AT&T’s strategy mirrors IBM’s, with a substantial dividend compensating for a decline in stock price – now trading below $18/share, a 34% drop from 2014. Despite this, the company’s total return over the last decade, including its 6.4% dividend yield, is an impressive 40%.
AT&T’s decision to cut its dividend in 2022, for the first time in 35 years, was a strategic move that allowed the company to reduce its long-term debt significantly, now standing at $133 billion. With an annual free cash flow nearing $20 billion, AT&T’s hefty dividend appears secure. Moreover, its low P/E ratio of just 7 makes it an enticing option for value-oriented investors.
3. Cisco Systems (NASDAQ: CSCO) Cisco Systems, a stalwart from the early internet era, continues to flourish. The company, known for its networking products, reported $13.6 billion in net income on $58 billion in revenue over the past year. Importantly, Cisco’s free cash flow has reached $16.3 billion, facilitating a healthy dividend payout of $1.56/share, yielding 3.1%—well above the S&P 500 average.
Beyond being a reliable source of dividends, Cisco has demonstrated commendable growth, with a 21% increase in revenue and a 53% rise in free cash flow over the past decade. The company’s P/E ratio of 13x is notably lower than the S&P 500 average, making it an appealing choice for investors seeking both value and growth.
In summary, while tech stocks may not be the first choice for dividend seekers, companies like IBM, AT&T, and Cisco Systems offer compelling reasons to reconsider. These stocks blend the dynamic nature of the tech industry with the stability and ongoing income of dividends, making them worthy of attention for investors seeking a balanced portfolio. Keep an eye on these names for potential opportunities in the realm of dividend-paying tech stocks, as highlighted by Wall St War Room.
