If you’re an investor seeking to earn steadily growing income from your retirement portfolio, technology companies might not be on your radar. Returning cash to shareholders through dividend payments isn’t the priority of many tech firms that generally redeploy their cash to generate more growth.
That said, you can still find a handful of top technology companies that pay growing dividends each year, making them a good fit in any retirement portfolio. These names generally offer a combination of capital growth and decent quarterly income.
Here’s a look at two tech stocks that pay steadily growing dividends, making them a good addition to your retirement portfolio:
While picking a quality stock for your retirement portfolio, one of the most important factors is stability in dividend income in both good and bad times. Microsoft (NASDAQ:) is one stock that fits that bill perfectly.
Many investors mistake Microsoft for just a pure technology play in great growth mode. But if you dig a little deeper, the company also has terrific income appeal. Microsoft has an excellent track record when it comes to rewarding investors.
During the past five years, Microsoft has delivered about 9.4% growth in its payout per year, supported by a low payout ratio and strong underlying businesses. Last month, MSFT announced a massive 11% hike in its payout, increasing the per-share quarterly dividend to $0.62. With this dividend hike, Microsoft also has announced a $60-billion share buyback plan, which is another way of rewarding investors by reducing the company’s free-float.
MSFT’s 1% dividend yield may look meagre to many investors, but don’t forget that Microsoft is still growing, while offering great upside potential, too. Including dividend payments, Microsoft has delivered 411% in total returns over the past five years.
Going forward, there is a good possibility this Washington-based company will keep boosting its payout as its growth momentum continues. During the pandemic, demand surged for its cloud-computing services, video gaming and computers, helping the company to make massive profit.
If you are investing for retirement, you need to find companies like Microsoft to stash in your portfolio. These are the giants that have the power to defend their businesses and pay you for the rest of your life.
2. Texas Instruments
Texas Instruments Incorporated (NASDAQ:), a tech giant that produces electronic products including chips that are used in many diversified industries, is another solid name to add to your income portfolio.
The Dallas-based company has tens of thousands of products and more than 100,000 customers who make everything from phones to military hardware. That extensive depth insulates the company’s revenue from the cyclical nature of the chip industry, making it a reliable income generator.
The company’s dividend program has been growing for the past 18 years. With an annual dividend yield of around 2.38%, TI currently pays $1.15 a share quarterly, which has grown 26% per year since 2004.
With its payout ratio of just over 60%, TI is in a comfortable position to hike its dividend going forward. In addition, the company’s long-term growth prospects are bright with the amount of electronics being added to cars and machinery.