The stock market can be nerve-wracking at times, especially in the volatile technology sector. Wall Street may be in the midst of a new bull market, but there’s still plenty of turmoil to deal with. But if you’re looking for an investment that promises the business growth of exciting tech stocks and the long-term stability of blue-chip companies, there are useful shortcuts you can take.
The trick is to look for reliable dividends. Even in Silicon Valley, generous dividends suggest solid cash returns and a relatively benign stock price chart. Thanks to pure mathematics, when stock prices soar, dividend yields fall, so higher dividends will steer you away from stocks that are too expensive. The flip side of the same equation is that you’re usually not looking for the very high yields that come with a big drop in stock prices.
In that regard, I believe there are some top-quality tech stocks with dividends that are in the Goldilocks zone. It’s a great place to start investing in low-risk tech now.Let me show you why international business machine (NYSE:IBM) and intel (NASDAQ:INTC) Dividend investors in February 2024 should check all the right boxes.
1. IBM: Dividend yield 3.6%
When I think of a solid commitment to paying dividends, Big Blue always comes to mind. IBM’s streak of dividend increases began with his 40% increase in January 1996. The split-adjusted quarterly dividend increased from $0.063 to $1.66 per share. This represents an increase of 2,560% over 28 years.
Dividend increases have been modest since the coronavirus pandemic began, but these symbolic increases never stopped. Even better, dividend checks are always directly funded by free cash flow, and in the 2022 inflation crisis, his cash-based dividend payout ratio reached 85%.
flat, flat Even better, Big Blue is finally reaping the fruits of a strategic shift that began more than a decade ago. The IBM you see today has restructured its business model with a laser-like focus on high-growth markets such as data security, cloud computing, and artificial intelligence (AI).
Yes, you heard me. IBM has quietly built a world-class business around the Watson AI platform. The company was a little late to the AI boom, as it takes time for enterprise-class customers to get new solutions through testing and administrative approval, but the financial benefits are starting to trickle down.
Therefore, IBM offers a promising future of high-margin AI services as well as generous cash-back dividends. Not too shabby, right? And the only clue we needed to arrive at this incredible investment today was its attractive yet affordable 3.6% dividend yield.
2. Intel: Dividend yield 1.2%
Switch gears without leaving your neighborhood. Intel’s semiconductor heritage has been intertwined with IBM’s software and systems since its early days (in terms of a rapidly changing technology field, anyway).
Intel’s dividend chart isn’t pretty, and there’s a good reason for that. As you know, the tech giant is doing everything in its power to expand its chip manufacturing capabilities, building and ramping up manufacturing facilities all over the world. This included cutting the dividend significantly in 2023, increasing its debt balance, and accepting several quarters of negative cash flow.
In return, Intel now operates one of the world’s largest semiconductor manufacturing services for other chip designers. This is a sudden strategic shift that takes advantage of the Biden administration’s CHIPS Act and a long-standing lack of global chip manufacturing capacity.
Today, Intel stock offers a different kind of hardware giant whose negative cash flow should emerge from a bath of red ink over the next few years. Playing the infrastructure role in this AI-driven era, where memory chips and high-volume processors are in high demand, could be a genius move in the long run, and Intel’s management believes that the AI craze will be It looks like you saw it coming from a mile away. The timing is too perfect.
Oh, and Intel’s dividend yield was just under 6% at its peak before the dividend cut. This is uncomfortably high, especially if the company needs additional cash to build its business. The current yield of 1.1% is on the low side of that sweet spot, but still respectable. And again, this reasonable yield is a good starting point for deeper stock analysis.
Should you invest $1,000 in International Business Machines right now?
Before buying International Business Machines stock, consider the following:
of Motley Fool Stock Advisor Our analyst team has identified what they believe Best 10 stocks What investors should buy right now…and International Business Machines was not among them. These 10 stocks have the potential to generate impressive returns over the next few years.
stock advisor provides investors with an easy-to-understand blueprint for success, including guidance on portfolio construction, regular updates from analysts, and two new stocks each month.of stock advisor Since 2002, the service has more than tripled S&P 500 returns*.
See 10 stocks
*Stock Advisor will return as of February 20, 2024
Anders Bylund holds positions at Intel and International Business Machines. The Motley Fool recommends Intel and International Business Machines and recommends the following options: A long January 2023 $57.50 call on Intel, a long January 2025 $45 call on Intel, and a short February 2024 $47 call on Intel. The Motley Fool has a disclosure policy.
2 High Dividend Tech Stocks to Buy in February 2024 Originally published by The Motley Fool