Often when people think about investing in technology stocks, dividends are the furthest thing from their minds. But for those who know where to look, the tech industry contains some of the juiciest dividend yields our market has to offer.
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To help get you started, we asked three top Motley Fool investors to each discuss a high-yield tech stock that they believe investors would be wise to consider. Read on to learn why they think Verizon Communications (NYSE: VZ), Qualcomm (NASDAQ: QCOM), and Intel (NASDAQ: INTC) fit the bill.
This telecom leader is back on track
Steve Symington (Verizon Communications): When Verizon lost postpaid wireless customers for the first time earlier this year, it became evident that steep competition in the space was more than just a small nuisance for the telecommunications giant. But Verizon righted the ship with the help of its prompt launch of a new unlimited plan in response. As a result, in the second quarter the company maintained healthy retail churn of 1.18% and gained 614,000 retail postpaid connections. In addition, Verizon is poised to benefit from the impending rollout of its 5G network across the country, which should serve to further solidify the loyalty of its customer base and extend its industry leadership.
What's more, Verizon closed on its acquisition of Yahoo! last quarter, a move that will significantly expand Verizon's media and telematics segment. Yahoo! boasts more than 50 media and tech brands -- notably including HuffPost, Yahoo Sports, AOL.com, MAKERS, Tumblr, and Yahoo! Finance -- which will be rolled into a new Verizon subsidiary called Oath.
As a result, it was no surprise when Verizon stock popped more than 6% following that quarterly report. But with the wind at its back, shares trading at only 12 times trailing 12-month earnings, and a dividend yielding 4.9% annually at today's prices, Verizon stock should still have room to climb from here.
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Time to lock up Qualcomm's hefty dividend yield
Anders Bylund (Qualcomm): If you believe Qualcomm is falling apart at the seams, this isn't the dividend stock for your portfolio. Otherwise, the chip giant offers a tremendous effective dividend yield right now, and it looks like a good idea to lock it in before the stock springs back to life.
Just in case this wasn't obvious already, I'm pretty sure Qualcomm will do fine in the long run and the depressed stock will start to rise again.
Qualcomm's dividend execution is impeccable. The company's quarterly payouts per share have more than doubled in five years and quadrupled over the past decade. More than half of Qualcomm's free cash flows are poured into dividend payments. On top of that shareholder-friendly policy, Qualcomm's share prices are trending 21% lower so far in 2017. That combination does wonders for dividend yields, which stand at a generous 4.3% today.
Those falling share prices are based on fears that Apple (NASDAQ: AAPL) might go elsewhere for its wireless radio chip needs and/or extract billions of dollars in antitrust lawsuit damages. Facing off in court against your largest customer is never a comfortable situation, and investors do have reason to be nervous here.
But the worst-case scenario is never the most likely outcome, either. Apple and Qualcomm will probably settle their differences out of court, though the lawsuits may drag on for years to come. And Qualcomm is exploring new high-growth markets to replace the fading allure of smartphone and tablet radio chips. Above all else, the pending buyout of NXP Semiconductors (NASDAQ: NXPI) promises to establish Qualcomm as a giant in the automotive computing market just as that industry heads off into extreme growth powered by self-driving cars and advanced infotainment systems.
In my eyes, the company is likely to stave off lawsuit disasters and do whatever it takes to close the NXP merger. When that happens, Qualcomm shares should bounce back -- and the effective dividend will shrink. So it makes sense to lock in Qualcomm's juicy dividends before the Apple situation simmers down and the NXP buyout closes.
Tim Green (Intel): Shares of PC and server chip giant Intel haven't done much over the past few years, sitting slightly below where they traded at the beginning of 2015. After years of facing next to no competition in its core markets, the company is now being threatened from multiple angles. Advanced Micro Devices has launched new PC and server processors, the most competitive products from that company in a long time. And the workloads of the future – think artificial intelligence – are being powered by graphics chips, mainly from NVIDIA.
It's clear that Intel has some execution problems, probably the result of not being challenged for so long. But those willing to be patient as the company finds its way will be rewarded with an above-average dividend. Intel stock currently yields about 3.1%, well above the sub-2% yield of the S&P 500. Dividend growth has been sluggish in recent years, and that sluggishness will probably continue. Intel is no dividend growth stock, at least not for the time being.
Intel's results have held up well despite the threats to its business. During the second quarter, revenue in the client computing and data center groups jumped 11.9% and 8.6%, respectively. Data center operating margin did slump, and I would expect that trend to continue as Intel faces increased competition. But the bottom line is that Intel remains a growing and highly profitable company. As a dividend stock, it's not a bad choice.
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Anders Bylund owns shares of Intel. Steve Symington owns shares of Nvidia. Timothy Green has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends Apple, Nvidia, and Verizon Communications. The Motley Fool owns shares of Qualcomm. The Motley Fool recommends Intel and NXP Semiconductors. The Motley Fool has a disclosure policy.