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Sun. Jul 14th, 2024

3 Dividend-Paying Technology Stocks to Buy Now

By Vaseline May26,2024

Most investors who buy technology stocks do so because of the potential for high growth and price appreciation. Considering that technology stocks have been the biggest winners of the past decade, this makes sense.

On the other hand, some investors prefer dividend-paying stocks. In some cases, it may be worth giving up some growth potential for stable, reliable dividend income.

What may not be well known is that many fast-growing technology stocks also pay dividends. These stocks can offer the best of both worlds. Investors looking for growth and share price appreciation can also rake in some dividend income along the way, improving total returns over time. With this in mind, here are three dividend-paying stocks worth buying right now.

ASML

Dutch company ASML (NASDAQ: ASML) makes the lithography machines necessary for the manufacture of semiconductors. For the most advanced chips, ASML is the only company in the world that sells these machines. For a company that plays a major role in an essential product like semiconductors, it’s no surprise that its shares are up 1,170% over the past decade, which is easily better than the past decade. S&P500‘s total return of 241%.

Currently, ASML’s dividend yield is 0.71%. That doesn’t sound impressive at first glance, but when you look back at the stock’s performance over the past ten years, including dividends, the picture changes. A $1,000 investment in ASML 10 years ago would be worth $11,590 today without dividends and $12,730 with dividends.

Management expects 2024 to be a slow growth year as much of the semiconductor industry is in a down cycle. But ASML has enough orders to get through the year without any problems and expects to be able to grow again in 2025.

Microsoft

Long known for its Windows operating system and office software suite, Microsoft (NASDAQ: MSFT) has been in the news lately due to the move to artificial intelligence (AI). With the substantial investment in OpenAI, Microsoft has started integrating generative AI into many of its products.

The company also sees higher cloud revenue for its Azure cloud computing business, as other companies need additional computing power for their own AI ambitions.

Like ASML, Microsoft has been a market-beating stock over the past ten years, with a total return of 1,160%. Without dividends, that return would have been 972%. The dividend currently yields 0.69%.

Microsoft expects its cloud infrastructure business Azure to grow 30% to 31% in the current quarter, driven by AI spending from its customers. This matches the recently reported third quarter of fiscal 2024.

Alphabet

Technically, Alphabet (NASDAQ: GOOG) (NASDAQ: GOOGL) is not yet a dividend stock. Shareholders of June 10 will receive the very first dividend payment from Alphabet on June 17.

This new dividend program was announced alongside the April first quarter earnings results. The introduction of a dividend isn’t a total surprise, considering Alphabet generated $16 billion in free cash flow in the first quarter and has more than $110 billion in cash, cash equivalents and marketable securities on its balance sheet.

For starters, Alphabet’s dividend yield won’t be much to write home about: around 0.5% based on the share price at the time of its first-quarter earnings release. But the company generates a lot of cash, so it’s likely the payout could increase over time. This is worth considering for those who may want more dividend income in the future as they approach retirement.

The dividend announcement may have headlined the first quarter results, but the rest of the company’s performance was impressive. Revenue increased by 15%, operating margin increased by 7 percentage points and earnings per share grew by 62%.

Alphabet is also making strides in the world of AI. At a recent event, the company highlighted its Gemini AI as it looks to keep pace with Microsoft’s ChatGPT. Users of Alphabet’s popular Google products like Gmail, Google Photos, and Google Search can expect more AI integration over time.

Should you invest €1,000 in ASML now?

Please consider the following before purchasing ASML shares:

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Suzanne Frey, a director at Alphabet, is a member of The Motley Fool’s board of directors. Jeff Santoro holds positions at ASML and Microsoft. The Motley Fool holds positions in and recommends ASML, Alphabet and Microsoft. The Motley Fool recommends the following options: long January 2026 $395 calls to Microsoft and short January 2026 $405 calls to Microsoft. The Motley Fool has a disclosure policy.

3 Dividend-Paying Technology Stocks to Buy Now was originally published by The Motley Fool

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