Income investors like the steady payouts and growth potential that dividend stocks provide, but the tech-heavy Nasdaq 100 index hasn't historically been the first place that such investors have looked to find them. That's changed in recent years, though, as a growing number of big tech companies have matured to the point where more generous dividend payouts are justified. The 10 top-yielding stocks in the Nasdaq's most elite group all sport dividend yields well above the market average, but as savvy income investors know, a high yield doesn't necessarily make a stock worth buying. Let's take a closer look at this list to find the best stocks for the future.
The top 10 yields in the Nasdaq 100
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Below, you'll find the 10 highest-yielding stocks in the Nasdaq 100 as of Dec. 14:
The first thing one might notice about this list is that it's a fairluy diverse group of companies considering the index it's drawn from. On a market-capitalization weighted basis, the Nasdaq 100 gets about 60% of its value from technology stocks, with consumer discretionary and healthcare lagging far behind at 21% and 10% respectively. Yet we see above a telecom stock, a food giant, an industrial company, a biotech leader, and a payroll and business services specialist , in addition to representatives from the hardware, software, and services segments of the information technology sector.
Keeping it real
Another positive feature of this list of top-yielding Nasdaq dividend stocks is that it doesn't include many companies with substantial dividend risk. Seagate Technology has been making some income investors nervous for quite a while, but despite its ongoing financial challenges, the company has steadfastly maintained its payout. Bullish investors are hopeful that a transition from old-style hard disk drives to flash memory chips and solid state drives could help Seagate boost its growth, and for now, high demand for massive data-center storage has given new life to its old core product line.
Vodafone is the other true high-yield player on this list, and it's generally regarded as a global leader in wireless telecom. Vodafone posted a substantial loss in 2016, but that was largely the result of accounting-based moves to take advantage of tax benefits. With most of its revenue coming from Europe, but with meaningful exposure to emerging nations, Vodafone taps into the growth potential of telecom while still enjoying the stability of being a leader in some of the best-established markets in the world.
Multiple ways to profit
Finally, dividend investors should remember that they can make money in multiple ways by owning the right stocks. A number of potential catalysts could benefit these particular companies.
For instance, Qualcomm recently got a massive buyout offer from Broadcom, valuing the tech giant at more than $100 billion. Investors have already seen a big jump in the share price, and although Qualcomm rejected the initial bid, there's room for further gains in shares if Broadcom comes back with a higher number.
Dividend growth is also an option. Amgen recently said it would boost its payout another 15% in 2018 -- unusual among biotechnology firms, which generally reinvest a greater portion of their earnings into further research and development. PACCAR, the truck specialist, traditionally declares a special dividend each year; the $1.20 per share payout it will make in early January boosts what would be a rather pedestrian 1.5% yield without it to the more than 3% yield it enjoys today.
Growth opportunities also play a key role in fostering share-price gains. Although some of the names above aren't exactly growth engines, they each have opportunities to keep building on their success.
The Nasdaq isn't well-known for its dividends, but even this tech-heavy index can produce some worthwhile buys for income investors. Those who want their portfolios to include the best dividend stocks in the market can't afford to ignore it any longer.
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Dan Caplinger has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends Paccar. The Motley Fool owns shares of Qualcomm. The Motley Fool recommends Cisco Systems. The Motley Fool has a disclosure policy.