Neither the author, Tim Fries, nor this website, The Tokenist, provide financial advice. Please consult our website policy prior to making financial decisions.
There are many ways to make your money work for you. Buying stocks at their lower point and selling them at a higher point is the golden standard for most people — buy low, sell high. However, if you have patience and some extra money, these top dividend tech stocks could be a great source of steady income.
3 Tech Stocks that Pay Dividends
When it comes to dividend investing, you not only gain a potentially higher sell value of a company’s stock shares, but also a dividend income. As the company you invested in grows, it distributes a portion of its profits to shareholders. These portions are called dividends, and your cut depends on how many shares you own (DPS).
Usually, companies dish out DPS in the form of cash, but dividends can come in all forms of property, including stock shares. With a modest investment of about $3000, dividend-paying tech stocks are an excellent investment option if you account for their growth potential. In particular, buying $1,000 worth of shares across three tech stocks: Lam Research, Broadcom, and Skyworks Solutions.
Lam Research (NASDAQ:LRCX)
In the world of high-end electronics, there are only a few big players and Lam Research is one of them. Many companies can produce semiconductors, but Lam represents a critical part of the high-tech supply chain by furnishing them with the foundation – the fabricating equipment needed to manufacture integrated circuits and semiconductors themselves.
Competing with only a few other companies, Lam has the further advantage of accumulating data on its fabrication processes. You might have noticed that as we move into smaller and more powerful chips, under 10nm, the manufacturing process becomes increasingly fraught with difficulties.
Lam resells the data it accrued to other manufacturers, therefore allowing them to get better yields as we get closer to the technological ceiling of miniaturization. Accordingly, Lam’s support service grew YOY (year-over-year) last financial quarter by 17%, constituting 33.2% of its revenue. On the other end, Lam’s manufacturing equipment also grows in sales, by 18.8% YOY, despite the pandemic disruption.
As 5G integration into smartphones, laptops, and tablets heats up, Lam only stands to benefit further. This is on top of increased NAND and DRAM memory demand. In short, Lam Research is the fundamental part of the tech ecosystem, upon which all other manufacturers depend to launch their products, from smartphones to server farms.
Although Lam dividend yield is currently at 1.24%, the total dividend yield for shareholders is higher with Lam’s frequent share repurchasing, at about 4%.
Designer and supplier of communication chips found in mobile devices, laptops, and routers, Broadcom is poised to reap massive benefits as the entire world upgrades its networks to 5G. Broadcom’s Q2 2020 delivered over 30% growth, according to Broadcom CEO Hock Tan.
Considering how long it took to install 4G networks across the world, Broadcom has a long decade ahead for mass profits. It already has deep pockets with $9.97 billion available cash, of which $4.9 billion it used for dividends and $1.75 billion for share buybacks.
Furthermore, many analysts laud the 5G networks as the onset of the Fourth Industrial Revolution. The bandwidth and low latency of 5G are critical to cross many technological thresholds for a new kind of FinTech ecosystem.
At Broadcom’s current 4.21% dividend yield, it is difficult to find a reason to miss out on this opportunity.
Skyworks Solutions (NASDAQ:SWKS)
In the same field as Broadcom, Skyworks Solutions may not be as big or old as the rest of the semiconductor communication players, but it excels nonetheless. At 18 years of age, Skyworks Solutions has enjoyed steady growth. From 2014, when it started issuing dividends, Skyworks has increased its payouts every year, with the last increase of 14% this July.
Just like Broadcom, Skyworks will benefit greatly from the world’s retooling to 5G networks. On top of that, its fortunes are tied with the record-breaking profits of Apple, as almost half of Skywork’s revenue comes from supplying Apple with Wi-Fi and Bluetooth chips.
Outside of consumer electronics, Skyworks supplies automotive and other industries that increasingly rely on automated manufacturing and reliance on connectivity with Wi-Fi 6 chips. If its Apple link is not enough for you, Skyworks has a policy of returning a portion of its cash to shareholders. It can afford this due to 30% of the cash flow profit margin, and a RoI of 19% last year.
Currently, Skyworks Solutions’ dividend yield sits at 1.36%.
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