With dividend-based investment strategies struggling to keep up with the broad market, investors would do well to sprinkle technology stocks in their dividend portfolios, suggests Chuck Carlson, editor of DRIP Investor.
For dividend investors, I see a number of attractive tech stocks — some with yields of 2% or higher — from which to choose. These stocks offer direct-purchase plans whereby any investor may buy the first share and every share directly from the company.
It is worth noting that several of the stocks on the list, including a few of my favorites, offer dividend yields above the yield of the S&P 500 (currently 1.4%). One such stock is Qualcomm (QCOM). Semiconductor stocks in general have had a good run. Qualcomm trades around its 52-week high but has further upside.
As an owner of Qualcomm, I have witnessed sharp run-ups in the stock, only to see these shares drift down again. So, only investors with strong stomachs should apply. But Qualcomm does have a solid presence in a number of growth markets, and I’m hopeful that this rally will have legs. The dividend yield of more than 2% enhances appeal.
Another favorite with a market-beating dividend yield is Broadcom (AVGO). Broadcom is involved in both hardware and software products and offers one of the more attractive values in the technology space. The stock represents one of my favorite plays in the tech sector right now.
One more favorite sporting an attractive yield is IBM (IBM). The company has been doing a good job of improving the growth profile of its business portfolio, and the stock’s performance is reflecting its improved prospects.
The stock has beaten the performance of the S&P 500 by approximately 15 percentage points over the last year, a fact that I’m guessing surprises a lot of investors who still regard IBM as a no-growth, low-return, “yesterday” technology stock.
The yield of 3.5% enhances total return appeal and should provide some downside support to the stock price. IBM’s direct-purchase plan has a minimum initial investment of $500. Subsequent investments are a minimum $50.
Roper (ROP), while not a household name, is one of the more interesting ways to play technology. The firm operates a portfolio of 27 companies in various technology segments, including applications software, network software, and technology-enabled products. These 27 companies are all leaders in their small, defensible markets.
The firm takes the excess free cash flows from these businesses and redeploys the cash in the areas offering the best opportunities, including acquisitions. This business model has provided very nice returns for shareholders — a $10,000 investment 10 years ago in Roper stock would now be worth more than $40,000, and that doesn’t include reinvested dividends.
Although the dividend yield is modest at 0.6%, dividend growth should be decent. The quarterly dividend has more than doubled since 2017. Investors would do well to use price pullbacks to buy this under-the-radar tech stock.
