Dividend growth can be more valuable over the long term than going for a high yield up front. The steady increases can compound substantially over decades, turning a relatively low dividend yield today into a higher yield on the original cost basis.
Some of the best dividend growth stocks are in the technology sector. This is a great way to profit from the growth of artificial intelligence (AI) while building your retirement income base. Here are two tech stocks with excellent dividend records to buy and hold for the long term.
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AI is undergoing a massive investment boom, driving enormous demand for Broadcom (NASDAQ: AVGO), a leading supplier of AI training hardware for data centers.
This leading semiconductor business currently pays a forward yield of 0.77% based on an annual dividend of $2.60 per share (paid quarterly). Broadcom’s dividend has grown at an annualized rate of 12% over the past five years. Assuming it maintains that growth, an investor would be earning a yield of 2.39% on cost in 10 years and 7.43% in 20 years. That’s the power of compounding growth.
Broadcom should sustain strong dividend growth. It makes high-performance networking switches, customized AI accelerators, and infrastructure software solutions for data centers. Its AI-related product backlog is $73 billion. This is a very profitable business, generating $23 billion in trailing-12-month net income on $64 billion of revenue.
The company pays out roughly half of its annual earnings in dividends, leaving plenty of room to maintain and grow the dividend even if it experiences a year of weak demand during a recession. All told, this is an excellent AI stock that can also help you grow your passive income over the long term.
Microsoft (NASDAQ: MSFT) has generated robust profits and revenue from its software for decades. It began paying dividends to…
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