Investors typically think of growth companies as purely playing on a rising stock price. And the technology sector is indeed known for delivering home run share price appreciation when things go according to plan. However, income investors can also profit from various high-return, undervalued tech stocks.
That’s because, contrary to popular belief, many of the best undervalued tech stocks also come with significant dividends. While there aren’t many outright high-yield tech stocks, quite a few pay healthy dividends in excess of what the overall S&P 500 index offers.
Some tech stocks only pay dividends because their businesses stopped growing long ago. However, these three tech stocks with dividends to buy are still thriving businesses that should enjoy both rising profits and dividends in the coming years.
Taiwan Semiconductor Manufacturing (TSM)
Taiwan Semiconductor Manufacturing (NYSE:TSM) is the world’s dominant semiconductor manufacturing company. With a more than 55% market share, TSM is far and away the world’s dominant player in the chip foundry space. By comparison, the second-largest player, Samsung Electronics, has just 16% market share.
This should make TSM the inevitable winner as the semiconductor industry continues to take off. The surge in demand for chips for artificial intelligence has taken all the headlines recently. And there’s more to the story. Semiconductor density will continue to rise as consumer goods such as autos and home appliances use semiconductor technology more.
TSM stock is up substantially year-to-date. But it started off with a very low base, as investors had punished the stock due to perceived risk relating to China. As a result, shares still go just 20 times forward earnings and offer a 2.2% dividend yield.
Cisco Systems (CSCO)
Cisco Systems (NASDAQ:CSCO) is a classic example of a tech stock with a dividend to buy today.
The networking giant was once the glamorous market leader; 2000, internet growth seemed boundless, and traders bid CSCO stock to the moon.
Over time, internet growth slowed to a more modest level, and valuations for leading internet hardware companies such as Cisco collapsed.
This evolution has created an opportunity for growth and income investors. CSCO stock sells for just 13 times forward earnings today. And shares offer a dividend yield of more than 3%.
While Cisco struggled to maintain revenue growth in recent years, the company is back on track now. Cisco’s move into additional software and security solutions layers nicely on top of the company’s dominant position in tech hardware. Management also mentioned generative AI as a potential opportunity for Cisco going forward.
While Cisco’s internet routing and communications equipment isn’t a hyper-growth market anymore, it’s evolved into a solid business that rewards investors with a generous dividend.
Qualcomm (QCOM)
Qualcomm (NASDAQ:QCOM) is a leading semiconductor company focused on mobile communications. The firm started by creating and licensing key intellectual property related to innovations such as 3G networking.
Qualcomm has made a fortune over the years, collecting royalties from smartphone sales, thanks to its presence in 3G and 4G networking. The firm continues to be involved in this space, and the 5G rollout has created more opportunities for Qualcomm. Lately, though, Qualcomm has branched out by creating its own Snapdragon platform for smartphones and tablets.
Not surprisingly, QCOM stock sold off in 2023 amid the weakness in the smartphone market. That’s understandable, but people selling down here are missing the bigger picture. Qualcomm shares now go for just 13 times forward earnings and offer a nearly 3% dividend yield. That’s a fine offer for this key mobile communications and entertainment player.
On the date of publication, Ian Bezek held a long position in QCOM stock. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
