Many investors are attracted to technology stocks -- which can be more volatile than other types of stocks -- for their significant return potential. While the world of small- and mid-cap tech stocks is replete with candidates for large capital returns (and, of course, the corresponding risk of substantial losses), there are some larger technology stocks that still offer investors the opportunity to enjoy meaningful capital appreciation over time (although maybe not as quickly as a smaller company might) while also paying a substantial dividend.
Here are three technology stocks that -- at current prices -- offer sustainable dividend yields of at least 3%.
A great chip company
One technology company that's known for its generous dividend policy is Broadcom (NASDAQ: AVGO). The company is primarily a chip company, building products for a wide range of applications from the Wi-Fi chip inside of your iPhone to the processor that powers your cable box.
On top of that, Broadcom recently entered the high-margin enterprise software market via its acquisition of CA Technologies -- an asset that it's looking to make far more profitable through smart cost-cutting. (Broadcom has a rich track record of making successful acquisitions.)
After a recent 51% dividend raise, the company's shares currently offer a dividend yield of 4.18%, a figure that's generous both relative to what other semiconductor companies pay as well as to the kinds of dividend yields you can get from, more broadly, tech stocks.
A computer storage company
Another company that currently offers a generous dividend yield is computer storage specialist Western Digital (NASDAQ: WDC). Western Digital hasn't actually increased its dividend in a long time; indeed, the company's high dividend yield is more a result of its share price having fallen substantially. (The drop is likely due to the fact that the prices of NAND flash -- a commodity that underpins a large portion of Western Digital's business -- have been on the decline.)
If you bought Western Digital stock at higher prices, then that's got to be frustrating -- you're getting a much lower yield (since you bought it at a higher price) and you're down on your initial investment. However, for those looking to buy in for the first time, as well as those looking to add to their positions, the company's dividend yield currently sits at a generous 5.2%.
Now, fair warning -- the situation in NAND flash doesn't look like it'll get better in the short term. However, if you buy into the story that Western Digital's management is telling investors -- that, in a nutshell, it's going after a large and growing total addressable market -- and you're willing to get paid a hefty yield to wait for things to improve, Western Digital stock might be worth a closer look.
A chip equipment stock
Semiconductor equipment maker KLA-Tencor (NASDAQ: KLAC) currently offers a generous 3.29% dividend yield. Chip stocks in general -- including vendors of finished semiconductor products, contract manufacturers, as well as the vendors of the equipment that those contract manufacturers use to build those chips -- haven't been doing that well lately.
Indeed, the iShares PHLX Semiconductor ETF (NASDAQ: SOXX) is down about 10% over the last year.
KLA-Tencor's stock hasn't been spared from that decline; the stock is down more than 26% from its 52-week high. However, the company's current dividend yield sits where it does thanks to that share price drop.
The business itself, though, seems to be doing quite well. During its fiscal 2018, the company enjoyed revenue growth of 16%, with operating profit rising more than 24%. The company's fiscal 2019 was also off to a good start, with the company's revenue growing 12.7% and operating income rising 27.2%.
The dividend itself also seems sustainable. Over the last 12 months, KLA-Tencor generated $7.43 per share in free cash flow -- more than twice the company's $3.00 per-share, per-year dividend payment. This means that even if the company were to hit a rough patch, the current dividend isn't likely to be at risk. (In fact, analysts currently expect the company to post 6.6% revenue growth and 11.5% earnings per share growth in its fiscal 2019.)
10 stocks we like better than Broadcom LtdWhen investing geniuses David and Tom Gardner have a stock tip, it can pay to listen. After all, the newsletter they have run for over a decade, Motley Fool Stock Advisor, has quadrupled the market.*
David and Tom just revealed what they believe are the 10 best stocks for investors to buy right now... and Broadcom Ltd wasn't one of them! That's right -- they think these 10 stocks are even better buys.
Click here to learn about these picks!
*Stock Advisor returns as of November 14, 2018