Apple, Microsoft and Broadcom are three blue-chip dividend-paying stocks that long-term investors can consider buying right now.
In an uncertain and volatile environment, investing in dividend stocks can add stability to your equity portfolio. Like interest payments, dividend-paying stocks allow you to derive a stable stream of passive income. Additionally, investors can also benefit from long-term capital gains.
Generally, companies that pay investors a dividend have strong fundamentals, allowing them to generate robust cash flows across business cycles.
The ongoing sell-off in the stock market has dragged valuations of technology stocks lower. But as stock prices and dividend yields have an inverse relationship, it makes sense to add quality dividend stocks to your watchlist right now.
Here, we look at three blue-chip dividend stocks within the tech sector that are well-positioned to deliver inflation-beating returns in the upcoming decade.
One of the top-performing dividend stocks in the past decade is Broadcom (NASDAQ: AVGO), a company valued at $210 billion by market cap. In the last 10 years, AVGO stock has risen by 1,450%. After accounting for dividends, cumulative returns stand at 1,870%.
Broadcom pays investors annual dividends of $16.40 per share, indicating a forward yield of 3.15%. It has increased dividend payouts at an annual rate of 38% since June 2012.
Broadcom has a diversified business even though it generates a majority of revenue from selling wireless chips used in mobile devices. The company will also benefit from the worldwide shift towards 5G, which will be a key revenue driver for Broadcom.
The company ended last year with an order backlog of almost $15 billion, which shows cash flows will remain stable in the near term. In addition, Broadcom recently announced its intention to acquire cloud computing firm VMware in a cash and stock deal valued at $61 billion. This acquisition should diversify Broadcom’s revenue base, making it extremely attractive at current valuations.
One of the largest companies in the world, Apple (NASDAQ: AAPL) has returned 673% to investors in dividend-adjusted gains since June 2012. The iPhone continues to be the primary driver of top-line growth, allowing the tech heavyweight to increase sales by 9% year-over-year to $97 billion in fiscal Q2 of 2022 (ended in March).
Apple has successfully diversified its revenue base over the years and has several subscription services, including Apple Care, Apple Music, Apple TV+ and Apple Arcade. In the last six months, Apple’s services business reported revenue of $39.3 billion, rising 20% year-over-year.
Despite its massive size, Apple is on track to increase revenue by 8% year-over-year in fiscal 2022. Apple has a substantial installed base of over 1 billion devices, and its widening ecosystem suggests the services business should keep expanding at an enviable pace.
Apple pays investors annual dividends of $0.92 per share, which indicates a forward yield of 0.68%.
The final dividend stock on my list is Microsoft (NASDAQ: MSFT) — another multi-trillion-dollar tech giant. Like Apple and Broadcom, Microsoft has also outpaced the broader markets, returning 927% to investors in the past decade. It pays shareholders annual dividends of $2.48 per share, suggesting a yield of 1%.
In fiscal Q3 of 2022 (ended in March), Microsoft’s revenue soared 18.4% year-over-year to $49.4 billion. The key catalyst of this growth was the company’s services & other business, which saw sales increase by 28.8% to $32 billion.
Wall Street expects Microsoft’s sales to rise by 18.5% to $199.2 billion, while adjusted earnings are estimated to increase by 15.8% in fiscal 2022. We can see that Microsoft is firing on all cylinders despite concerns over inflation and interest rates.
Microsoft ended Q3 with more than $100 billion in cash and short-term investments. In the last four quarters, its free cash flow stood at $63.6 billion, and this metric has grown at an annual rate of 18% in the previous five years.
MSFT stock is down 26% from all-time highs and is trading at a discount of 43% compared to average analyst price targets.