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For many investors, dividend stocks and technology stocks are at odds.
After all, tech stocks are growth-oriented, and most prefer to reinvest in the company’s growth rather than pay out to shareholders. long time Apple CEO Steve Jobs refused to pay dividends, saying it was a sign that a company was out of business.
However, there are some divisive tech stocks, between more mature companies and certain sectors like semiconductors. Keep reading to see three of the best buys right now.
1. Corporate technology leader
Thinking about the enterprise software environment is difficult. Microsoft (MSFT -5.08%) He has no hands. Microsoft can easily add new products based on its massive Windows and Office user base and, like Teams, its competitor to Slack, an accessible messaging platform. sales force At $28 billion last year or Azure, the cloud infrastructure business is now challenging. Amazon Web Services for Industry Leadership.
Microsoft can easily grow through acquisitions, including LinkedIn, GitHub and the pending deal, so it generates more cash. Activision Blizzard. These acquisitions have strengthened its position in professional networking and social media, DevOps and open source, and video games.
In other words, Microsoft’s competitive advantage in enterprise technology appears to be strengthening, and the numbers bear that out. In the second quarter, revenue rose 12 percent, or 16 percent in constant currency, to $51.9 billion, while operating income rose 14 percent to $20.5 billion in constant currency, giving the company a 40 percent operating margin. Growth has been broad-based, and the intelligent cloud, including Azure, is now the largest business segment. Guidance was strong for the full year, calling for 19% growth in constant currency revenue and 21% growth in constant currency operating income.
Microsoft currently pays a dividend of 1.1%, and it’s now up 10% quarterly to $0.68. Microsoft is a good bet to come out of the recession with product diversity and an installed user base. Expect the company to deliver another strong round of results when it reports third-quarter earnings later this month.
2. Sticky software ecosystem
Intuit (INTU -4.46%)The parent of online business tools like QuickBooks and TurboTax has an enviable business model.
Once you upload your data and get used to using the products, there are high switching costs, giving it a sticky product ecosystem. Repeat customers are the cheapest to serve because there are no acquisition costs.
Over the past decade, Intuit has moved its software to the cloud, which has helped drive strong profitability. In the fiscal year just ended, it posted net income of $2.1 billion on revenue of $10.2 billion, or a margin of 20.3 percent.
Organic revenue growth remains strong at 24% in the most recent quarter, or 32% including the Mailchimp acquisition. At QuickBooks, its largest business, revenue grew 34 percent for the quarter and 33 percent for the fiscal year.
Like Microsoft Intuit should be fine even in a recession. The company provides tools businesses can rely on, and its profits make it more vulnerable to economic downturns than unprofitable software stocks.
With a dividend yield of 0.8%, Intuit won’t win any awards from income investors, but shareholders should expect the payout to grow over time given the company’s growth rate. In the year Since its inception in 2011, management has grown its dividend by 10 percent or more.
3. The company is based in the world
Taiwan semiconductor manufacturing company (T.M.M -6.19%) He may not be a household name even among investors in the US, but chances are he’s using the chips he produces.
This is because its chips are in most of the world’s devices. The company makes 65% of the world’s semiconductors and 90% of its advanced chips. Other chip companies focus on design but outsource much of the manufacturing to TSMC, giving the company a near monopoly. Semiconductors are capital intensive to build. Although the US enacted the CHIPS Act to support greater domestic production, it will take a lot to dislodge Taiwan Sem as the category leader, especially at a time when it is experiencing strong growth.
In the second quarter, revenue rose 36.6 percent to $18.16 billion, and earnings per share rose 76.4 percent. The company’s profit margin is also superior, with a net profit margin of 44.3% in the second quarter.
Based in Taiwan, TSMC is shielded from much of the turmoil surrounding Chinese stocks, making it safer than its mainland-based peers. The company is currently a strong dividend payer, offering a 2.4% yield.
With the maximum 50% discount on this main business in January, investors should take advantage of the sale.
John McKee, CEO of Whole Foods Market, a subsidiary of Amazon, is a member of the Motley Fool’s board of directors. Jeremy Bowman has positions in Amazon. It has a place in the Motley Fool and includes Activision Blizzard, Amazon, Apple, Intuit, Microsoft, Salesforce, Inc. And recommends Taiwan Semiconductor Manufacturing. The Motley Fool recommends the following options: long March 2023 $120 calls on Apple and short March 2023 calls on $130 on Apple. The Motley Fool has a disclosure policy.
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