There are many exciting technical stocks that offer investors the opportunity to take advantage of huge growth opportunities. But the world of technology is changing rapidly, and competition is fierce. One way to make sure that you invest in a company built to keep you going is to look for companies that pay regular dividends.
Yield is a sign of financial strength. Usually, companies that pay a regular dividend report their earnings for years. It is also a reflection of the management’s confidence in the future.
To give you some ideas, let’s now dive into two of my favorite dividend technology stocks: TE . connection (Telephone -0.64% ) And apple (AAPL -1.15% ).
1. TE . connection
TE Connectivity provides all the boring things that make data centers, electric vehicles, and communications equipment work. We’re talking about connectors, sensors, adapters, jacks, sockets, cables, and other components that the company sells in a variety of markets. In 2021, transportation equipment accounted for 60% of revenue, industrial products accounted for 26%, and communications supplies accounted for 14% of the business. Recently, fast growing markets such as 5G, connected homes, and cloud computing have created new opportunities for the company.
The stock is down 25% from its recent high, but that doesn’t reflect the company’s performance. Sales grew 8% year over year last quarter, with adjusted earnings per share increasing 20%.
The only negative was the transportation sector, where sales were down 15% compared to the same quarter last year. This was due to softness in car production, but management described demand as healthy across every sector overall.
In the long term, management is optimistic about opportunities to offer products for electric vehicles, factory automation and cloud applications. In other words, the future of TE Connectivity is secure. As different industries become more digital, a company’s relationships with its customers can help identify specific technological trends that can be leveraged.
What stands out in this business is a 10-year track record of incrementally improving operating margin and free cash flow, the hallmarks of a resilient business. You paid out 35% of your free cash flow last year in dividends. This brings the current dividend yield to 1.62%, which is not high, but higher than Standard & Poor’s 500 an average of 1.33%.
At a forward P/E ratio of 17, this technology stock offers good value relative to the market average, as the S&P index trades at a forward multiplier of 19.4. It is an off-the-radar technology stock that will provide you with a long-term rise while paying you some income along the way.
Apple has an enviable brand, selling a product that their customers keep with them all day long. There are many consumer brands that like to say that. “People expect Apple to solve tough problems with easy-to-use products,” CEO Tim Cook said during the fiscal first-quarter earnings call. And the iPhone has never been more popular.
In fact, Apple is trading right now, as consumers upgrade to 5G. Revenue hit a record high of $123.9 billion during the December quarter. With the recent launch of the new budget-friendly iPhone SE in March, revenue should remain solid in the near term. The stock is back 28% compared to a year ago when several tech stocks underperformed.
Apple’s dividend yield is below average, currently only 0.52%. But investors should value it as much as TE Connectivity. Over the past five years, Apple has raised its dividend by 48%, compared to 31% for TE Connectivity.
Apple’s lower revenue is mainly because the company paid out only 14% of its free cash flow last year. But the low return also means that it has ample scope for increasing profits. Additionally, the company stands on a mountain of cash to fund more capital returns for shareholders. It had $85 billion of net cash on its balance sheet at the end of December.
It is very likely that Apple will at least double its quarterly dividend payments over the next 10 years. So investors who buy today can earn a dividend yield of about 1% on an original cost basis by 2032. That’s the fun of owning a dividend growth stock.
This article represents the opinion of the author, who may disagree with the “official” recommendation position of the Motley Fool Premium Consulting Service. We are diverse! Asking about an investment thesis — even if it’s our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.