Big names in technology like Amazon, Netflix, and Facebook attract the most attention from investors, but older dividend-paying companies can also be fantastic long-term stocks. Patient investors can profit from a rise in the share price and passive income when stocks can balance income growth with dividend payments. Here are three actions that fall into this category.
1. Feed the world’s connections
Cisco Systems (NASDAQ: CSCO) (dividend yield: 2.6%) manufactures and sells hardware and software for networks and telecommunications. Its products help businesses communicate better, faster and more securely – a huge need in an increasingly digital business environment. The continued advancement of wireless technology from 3G to 4G, and now to 5G, creates a need for companies to upgrade their in-house equipment and update their products in the field, which will boost business Cisco activities in the future.
Cisco achieved over $ 49 billion in revenue in 2020 and is expected to grow 1% this year before accelerating its growth to nearly 5% in 2022. While Cisco’s revenue growth outlook is modest, it is very profitable, generating over $ 14.6 billion in available cash. flow in 2020.
Cisco paid out $ 6 billion in dividends in 2020, which translates to a dividend payout ratio of 41%. Its dividend can grow in the short term, thanks to its low payout rate. At the same time, the adoption of 5G in the coming years could offer an opportunity for accelerated revenue growth.
2. The âtollâ of the financial world
Visa (NYSE: V) (dividend yield: 0.5%) is a payments technology company. It operates a global network that connects merchants and banks, powering the 1,700 transactions per second processed on Visa-branded debit and credit cards. Visa and other payment networks owned by MasterCard, To discover, and American Express act as toll plazas, collecting a small percentage of every transaction that goes through their networks.
Global cash usage has declined 42% since 2019, according to WorldPay, and will be the least used traditional payment method in four years. The pandemic had an impact on Visa: its revenue of $ 21.8 billion in 2020 was down 5% from the previous year. However, these “global” trends in declining cash usage are not expected to hold Visa back, and the company is expected to grow revenues by more than 8% in 2021 to $ 23.6 billion and more than 19% in 2022. .
Visa produces a lot of free cash flow – $ 9.7 billion in 2020, or 44% of its revenue. The company only spent 27% of its 2020 free cash flow on dividends, a payout ratio of 27%. With Visa’s ability to convert a high percentage of its revenue into free cash flow and the expectations of accelerated revenue growth, investors could see both the stock price and dividends rise from it. here.
3. Dividends are bigger in Texas
Texas instruments (NASDAQ: TXN) (dividend yield: 2.2%) is a company that designs, manufactures and sells semiconductors in various markets around the world. Semiconductors are the “building blocks” of electronics used to make virtually every electronic device imaginable.
Industries have become increasingly digital over time, ranging from smartphones and automobiles to industrial end markets, increasing global demand for semiconductors over the years. Texas Instruments plays a key role in this industry, supplying approximately 80,000 products to over 100,000 customers each year.
Texas Instruments had $ 14.4 billion in revenue in 2020, and $ 5.5 billion, or 38%, was free cash flow, suggesting a very efficient business in terms of cash flow. Treasury. The company returned $ 3.4 billion of its free cash flow to investors as dividends in 2020 – a dividend payout ratio of 62%.
Texas Instruments is expected to grow 21% in 2021, bringing its revenue to $ 17.5 billion, which could significantly increase the cash available to increase its dividend payout. With the tech industry facing a semiconductor shortage, the business could be booming for Texas Instruments.
Here is the bottom line
Investors can find great dividend-paying stocks in the tech industry – it’s about finding companies that can turn a high percentage of their income into free cash flow. Each of these three stocks has general trends in its favor, and continued income growth could mean big gains for investors over the years.
This article represents the opinion of the author, who may disagree with the âofficialâ recommendation position of a premium Motley Fool consulting service. We are heterogeneous! Challenging an investment thesis – even one of our own – helps us all to think critically about investing and make decisions that help us become smarter, happier, and richer.