When investors think of dividend stocks, tech names don’t usually come to mind. Technology is a growth industry, and investors generally prefer that any idle, excess cash gets put back into the business. That’s the best ROI opportunity.
It’s a misnomer to think that the technology sector can’t — or doesn’t — have a few dividend stocks to choose from, though. It does, with several of these names reshaping their business models to drive the recurring revenue that lends itself to dividend payouts. Software-as-a-Service and access to cloud-based storage are a couple of platforms that are billed on a monthly or quarterly basis.
To that end, here’s a run-down of seven tech stocks that pay a dividend worth collecting. In all seven cases, the payout is pretty well protected, and apt to grow. Best of all, these stocks still offer strong growth prospects that the tech sector is so well known for.
Editor’s note: This article was originally published on June 26, 2018. It has been republished to reflect changes in the market.
Tech Dividend Stocks: AVX Corporation (AVX)
Dividend Yield: 2.3%
AVX Corporation (NYSE:AVX) isn’t a name on too many investor radars, and for good reason. With a market cap of a modest $2.7 billion, it just doesn’t have the publicity firepower many of its tech brethren have.
But, maybe it should.
AVX makes capacitors, transistors, sensors, connectors and more … all the things you don’t think about that get attached to, and put on, a circuit board that make your electronic devices work. This is the lifeblood of technology. Without companies like AVX, you wouldn’t have mobile phones, televisions or wireless internet.
The nature of its business lines also lends itself to paying a reliable dividend. It manufactures so many kinds of things for so many electronics outfits that it always has at least some customers to sell to. The yield of 2.3% may not be jaw-dropping, but considering the TTM payout of 47-cents-per-share was only 28-cents-per-share five years ago, what AVX lacks in yield it makes up for in dividend growth.
Tech Dividend Stocks: Cisco (CSCO)
Dividend Yield: 3%
Yes, the iconic king of the networking world, Cisco (NASDAQ:CSCO), is also a respectable dividend payer. Granted, the yield of 3% isn’t sky-high. It’s also a relatively new idea for the old company — Cisco only started paying any kind of dividend in 2011. Cisco takes its cash-flow-sharing pretty seriously though, and more than that, it is shifting its business model in a way that’s geared for paying a dividend.
How’s that? If you’ve listened carefully to the company’s rhetoric regarding recent quarterly reports, the phrase “recurring revenue” has been increasingly used. Rather than mere one-time sales of switches and routers, Cisco is selling subscription-based access to cybersecurity and traffic-management platforms.
Recurring revenue made up 32% of last quarter’s revenue, and that proportion seems to grow a little every accounting period. In that it’s reliable income (once a subscriber signs on, they tend to stay on board), it’s easy for Cisco to commit to a healthy dividend payout.
Tech Dividend Stocks: Infosys (INFY)
Dividend Yield: 4.3%
You name it, Infosys (NYSE:INFY) does it … or at least it has a hand in it.
In simplest terms, India-based technology company Infosys is a technology consulting and service provider. From bloackchain to “big data” to business transformation, Infosys can bring a lot to the table of a company that may not even know where to begin.
Yes, it’s another business model that’s well suited for dividend payments, in that much of its work is also recurring. More than that though, it’s just a great company.
While you hear a great deal about the incredible ways companies like Apple (NASDAQ:AAPL) and Microsoft (NASDAQ:MSFT) are changing the world through the use of technology, the fact of the matter is, most organizations have neither the ability or the desire to create their own technology-based solutions. They’re more than content to lean on the likes of Infosys, and pay handsomely for the work it does.
INFY currently yields 4.3%, which is getting “up there” among tech dividend stocks.
Tech Dividend Stocks: Nokia (NOK)
Dividend Yield: 4.1%
Infosys’ yield of 4.3% is impressive, but Nokia’s (NYSE:NOK) dividend yield of 4.1% is also noteworthy.
You likely know the company as the maker of mobile phones. But, truth be told, that’s the least of what it does. It got out of the business altogether a few years ago, selling the name to Microsoft. And, although it waded back into smartphone waters last year, it’s still not a name people take seriously in a market dominated by the iPhone and Samsung’s Galaxy lineup.
So what exactly has Finland-based Nokia Oyj been doing all this time to stay afloat? Building industry-specific communications solutions. For instance, it has created an entire communications framework that makes smart cities a reality. Nokia is also taking great strides in the healthcare arena, making the mobile monitoring of patients a snap.
Investors don’t see much of the work the company is doing, but that doesn’t mean work’s not being done.
Tech Dividend Stocks: Qualcomm (QCOM)
Dividend Yield: 3.8%
Qualcomm (NASDAQ:QCOM) is another former big name in the smartphone business that’s since been shoved to the back of the line thanks to Samsung and Apple. But, much like Nokia, Qualcomm has found new life in — and new opportunity in — making the chips that power smartphones and other wireless devices. Ever heard of the Snapdragon processor? That’s Qualcomm’s breadwinner.
That’s certainly not going to be a laurel the company can rest on forever though, so it’s thinking ahead. Its next-generation chipsets will be able to handle virtual reality and augmented reality, which (one way or another) is a big part of the future.
Whatever the case, with a dividend yield of 3.8%, QCOM shares have something to offer fans of income that also might want to take a shot at a little bit of growth.
Tech Dividend Stocks: Seagate (STX)
Dividend Yield: 4.6%
Seagate (NASDAQ:STX) isn’t a name that needs much on the way of introduction, or explanation. It’s one of only two major names in the hard disk drive (HDD) market, and although the advent of the solid state drive (SSD) has made things tough on Seagate by allowing newcomers into the disk-drive market, the company is holding up just fine. In short, it can afford to fund its current dividend yield of 4.6%.
But still, aren’t old-school disk drives a thing of the past, with an expiration date? Not just yet. Susquehanna Financial Group analyst Mehdi recently wrote, “We believe overall HDD [hard-disk-drive] unit shipments for the June Q are tracking several million better than expectations, a trend that is also expected to sustain into the Sep Q.”
As it turns out, traditional hard disk drives are better suited for use in a data center setting, and we’re still in the early innings of a data center buildout.
Tech Dividend Stocks: Iron Mountain (IRM)
Dividend Yield: 6.5%
Last but not least, add Iron Mountain (NYSE:IRM) to your list of tech dividend stocks to consider.
Contrary to popular belief, the rise of computers in the 90’s didn’t pave the way for a paperless world. If anything, computers allowed society to create even more paper documents, many of which required signatures, which in turn meant they had to be stored. Even with the recent proliferation of e-signatures, many printed documents still need to be stored.
Enter Iron Mountain.
Iron Mountain stores the mountain of paperwork organizations are required to retain for record-keeping purposes, but don’t have the room to store on site. Its customers pay “rent” to the company for holding onto those documents, spurring the recurring revenue that makes for a reliable dividend. Its current yield? An impressive 6.5%.
The truly-paperless era is finally upon us, suggesting a threat to Iron Mountain’s business model. Fear not though. The company is quickly learning the nuances of digital information, helping clients navigate the laws and logistics of the new era of record-keeping. That’s how it qualifies as a technology name.
As of this writing, James Brumley did not hold a position in any of the aforementioned securities. You can follow him on Twitter, at @jbrumley.