Tech stocks have not always been a good source of dividend stocks. In the past, income investors typically avoided the tech sector. But this has begun to change in the past decade.
The technology sector contains many reliable dividend growth stocks. This article will discuss three blue-chip tech stocks with more than 10 years of dividend increases and high dividend-growth potential.
Apple (AAPL)
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Apple (NASDAQ:AAPL) is a tech giant and the largest publicly traded company in the world. Apple stock has a market capitalization of $2.94 trillion. The company has a diverse lineup of popular products such as the iPhone, iPad, Mac and Apple Watch. The company also has a large services business such as iTunes and the App Store.
On Aug. 3, Apple reported Q3 2023 results for the period ending July 1. (Apple’s fiscal year ends the last Saturday in September.) For the quarter, Apple generated revenue of $81.8 billion, a -1.4% decline compared to Q3 2022. Product sales were down 5.7%, driven by a 19.8% decline in iPad sales. The iPhone segment (48% of total sales) was down -2.4%.
Service sales increased 8.2% to $21.2 billion and made up 25.9% of all sales in the quarter. Net income equaled $19.88 billion, or $1.26 per share, compared to $19.44 billion, or $1.20 per share, in Q2 2022. Notably, earnings per share increased 5% while company-wide profits increased 2.3%, due to a lower share count.
Going forward, Apple’s earnings growth will be driven by several factors. One of these is the ongoing cycle of iPhone releases, which creates lumpy results. In the long run, Apple should be able to grow its iPhone sales, albeit in an irregular fashion.
In addition, Apple’s Services unit, which consists of iTunes, Apple Music, the App Store, iCloud, Apple Pay, etc., has recorded a significant revenue growth rate in recent years. Services revenues grow at a fast rate and produce high-margin, recurring revenues.
Apple has raised its dividend for 11 years, every year since it initiated its dividend in 2012. The 2023 expected dividend payout ratio is 16%, indicating a highly secure dividend with lots of room for continued dividend increases. Apple stock currently yields 0.6%.
Oracle (ORCL)
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Oracle (NYSE:ORCL) is an information technology company that provides software, hardware and services. Its offerings include applications, platforms, and infrastructure technologies (cloud software), hardware products such as servers, hardware-related software products (e.g., operating systems), and services such as consultation and education.
Oracle reported its most recent quarterly results, for its fiscal 2024 first quarter, in early September. Quarterly revenue of $12.5 billion rose 8% year-over-year in constant currency. Growth was driven by cloud services and license support revenues, which increased 12% from the same quarter last year. Adjusted earnings per share increased 14% year-over-year.
Oracle is not operating a cloud business as large as its peers Amazon (NASDAQ:AMZN) or Microsoft (NASDAQ:MSFT), but it still is generating attractive growth in the markets it addresses. Infrastructure-as-a-Service, as well as Platform-as-a-Service, are markets that are growing at a fast pace, and should allow Oracle to maintain an attractive cloud computing growth rate going forward. Oracle Fusion ERP and Oracle’s Autonomous Database are touted by management as future growth drivers due to compelling pricing and top-tier technology.
At a payout ratio of less than 30%, the dividend is very manageable, and there is still a lot of room for further dividend increases. Due to the low payout ratio and the fact that the company was not impacted to a large degree during the last financial crisis, Oracle’s dividend is rated very safe. The company has increased its dividend for 13 consecutive years. Shares yield 1.5%.
Qualcomm (QCOM)
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Qualcomm (NASDAQ:QCOM) is a semiconductor manufacturer. The chip maker receives royalty payments for its patents used in devices that are on 3G, 4G, and 5G networks. Qualcomm has a current market capitalization of $132 billion and has annual sales of about $38 billion.
On Aug. 2, Qualcomm announced results for the third quarter of fiscal year 2023 for the period ending June 25. For the quarter, revenue fell nearly 23% to $8.44 billion and missed estimates by $70 million. Adjusted earnings per share of $1.87 compared unfavorably to $2.96 in the previous year but was 6 cents more than expected.
For the quarter, revenues for Qualcomm CDMA Technologies, or QCT, declined 24% to $7.17 billion. Automotive grew 13% to $434 million, while Handsets decreased 25% to $5.26 billion and Internet of Things was down 24% to $1.49 billion. Qualcomm Technology Licensing, or QTL, fell 19% to $1.23 billion. Qualcomm repurchased 4 million shares at an average price of $100 during the period.
Guidance for the fourth quarter was set at a range of $1.80 to $2, compared to consensus estimates of $1.94. Qualcomm is projected to earn $8.30 per share in fiscal 2023.
The company has grown earnings per share at a rate of 6.6% per year over the last decade. An agreement with Apple and Huawei, a lower share count, and leadership in 5G should allow the company to grow in the coming years. We also believe that demand for 3G, 4G and 5G headsets will increase following a recovery from the Covid-19 pandemic.
On April 12, Qualcomm increased its quarterly dividend 6.7% to 80 cents, marking the company’s 21st consecutive year of dividend growth. With a 2023 expected dividend payout ratio of 40%, the dividend appears secure with room for growth. QCOM shares currently yield 2.8%.
On the date of publication, Bob Ciura held a LONG position in AAPL stock. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.