We haven’t heard the term âstagflationâ for some time, but with rising inflation and the potential for slower economic growth, it may soon be back in fashion. And in these kinds of macroeconomic conditions, investors should consider the benefits of owning stocks that pay high dividends, but still offer hope for generous price appreciation.
Tech companies aren’t exactly known for their excellent dividend payouts. They generally invest their profits in new growth opportunities rather than distributing them to shareholders. But it’s not universal in the industry, and these three technology leaders offer investors the best of both worlds.
One problem that companies have recently faced and that almost everyone has heard of, whether they invest or not, is the shortage of semiconductor chips. Insufficient supply affects large swathes of the economy, from automakers to smartphone makers.
So it may seem strange to put Broadcom (NASDAQ: AVGO) at the top of a list of technology stocks with growth potential. It is a chip supplier for mobile phone manufacturers, especially Apple, which accounts for 15% of its turnover, but innovations and trends in the sector bear witness to the importance of Broadcom’s potential.
Not only is there an upgrade cycle underway in smartphones, but the rollout of 5G networks is a huge catalyst for both industry in general and Broadcom in particular as consumers replace their old mobile devices. by models compatible with the faster networking standard.
In addition, Broadcom describes itself as the “leading designer, developer and global supplier of a broad range of digital and analog semiconductor connectivity solutions that serve wired infrastructure, wireless communications, enterprise storage and industrial markets â. That’s a long way to say that the potential of your data center business is enormous.
Broadcom’s dividend of $ 14.40 per share yields a very respectable 2.9% per year to the current share price, providing shareholders with a steady stream of income as well as the potential for share price gains that should follow as its business grows.
If you haven’t looked closely IBM (NYSE: IBM) lately, there’s a good chance you still think of it as an old-fashioned, sclerotic IT company. This is far from the truth. While the tech mainstay isn’t a barn burner, it will be a stable player and its stock is worth considering.
His second quarter report illustrates why. Revenue increased 3% year-on-year to $ 18.7 billion, driven by its cloud business, which saw revenue increase 2.5% (after currency adjustments) to $ 6.1 billion, while its cloud and data platforms have jumped 8%.
Cloud-related sales account entirely for one-third of IBM’s total, and they also achieve their juiciest profit margins at over 78%. This is one of the main reasons IBM has been able to generate $ 11 billion in free cash flow in the past 12 months.
There’s no question that IBM stock hasn’t performed well over the past five years – heck, even over the past decade – but the transition it went through when the management team determined what his future would look like was indeed difficult. Since that massive pivot, it has focused on its big data strengths, and it continues to improve by leveraging its expertise with both public and private cloud platforms.
The tech giant has steadily increased its quarterly payouts, so over the past 10 years its dividend has doubled in size. At the current stock price, IBM is reporting 4.8% per year.
Another entry in the “you wouldn’t have guessed” category, Motorola Solutions (NYSE: MSI), is also a very different company from what it used to be. The Motorola you might remember split into two ten years ago. Its smartphone unit became Motorola Mobility, which was later bought out by Google (now Alphabet) then by Lenovo. The rest becomes Motorola Solutions, which focuses on public safety communications.
Of the three tech stocks discussed here, this one arguably offers the greatest growth potential. Shares are up 37% year-to-date and are 50% higher in the past 12 months as it continues to innovate beyond police radios and the like. It is now a major rival for Axon Enterprise (NASDAQ: AXON) in law enforcement body cameras, on-board video systems, digital evidence management and cloud-based support that works seamlessly with its computer-aided dispatch system.
While Axon has dominated the law enforcement market for years, Motorola Solutions is making strategic inroads and the results show up in its financial statements.
Second-quarter revenue jumped 22% from a year ago, as video security sales jumped 66% to $ 306 million. It also recorded its largest fixed video security order – a $ 5 million purchase from a federal government customer.
Motorola Solutions began paying dividends the year after its separation from Motorola Mobility, and increased them each year. Over the past decade, the quarterly payout has gone from $ 0.22 per share to $ 0.71 per share today, for a modest annual return of 1.3%. As its business grows, investors can be comfortably assured that the price of this tech stock and its dividend is likely to continue to rise.
This article represents the opinion of the author, who may disagree with the âofficialâ recommendation position of a premium Motley Fool consulting service. We are motley! Challenging an investment thesis – even one of our own – helps us all to think critically about investing and make decisions that help us become smarter, happier, and richer.