Tech stocks are typically associated with growth and not income. The reputation of tech stocks as dividend-paying stocks still rings true, but many are now paying dividends.
Tech stocks that offer dividends and growth can be a good investment for investors seeking growth and income. In this article, I identify several stocks that provide growth and income. We will discuss three top tech stocks with strong growth prospects and rising dividend income in the future.
A stock of this type can provide both capital appreciation and dividend income, which can help investors build wealth.
These are three dividend stocks:
- Micro Focus International plc
- Skyworks Solutions Inc
- Microchip Technology Incorporated
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Dividend Stocks: Micro Focus International plc
We start with Micro Focus, an enterprise software company based in the United Kingdom. It offers software products for modernizing applications and connecting them. Applications delivery management, information security management, and governance are also part of the package.
MFC integrates its services with Microsoft products to reduce infrastructure costs for government clients. Established in 1976, the company generates revenue of just over $3 billion annually, and its market capitalization is $1.65 billion. According to its latest earnings report, the first half of Micro Focus’ fiscal year ended on April 30 with weak results. Shares were valued at 66 cents, reflecting an 8.3% decline from last year.
Roughly $460 million of revenue, down 4.6% from the second half of last year. From licensing, revenues increased by 10%. Other revenue areas, however, decreased.
A loss of 7.7% was reported in adjusted EBITDA, while the margin fell 130 basis points to 37.7%. Although weak, these results were better than those of the second half of last year. Accordingly, the company may be facing the worst at this point. During the company’s fiscal year, which ended in October, earnings-per-share were expected to be $1.31.
The stock trades at just 4.1 times estimates for this year, just 58% of fair value. The company is also expected to grow earnings by 4% annually and pay a dividend yield of 4.6% to shareholders. As a result of these factors, we expect Micro Focus to generate total returns of 18% annually in the next few years.
Skyworks Solutions Inc
We now examine Skyworks Solutions, a company that designs, develops, manufactures, markets, and distributes semiconductor products. Many company products are available, such as attenuators, amplifiers, converters, and chipset-based wireless analog systems.
Telecommunications, automotive, cellular infrastructure, wearables, connected homes, gaming, and aerospace use these products. With a market capitalization of nearly $27 billion, Skyworks founded in 1962, generates about $5 billion in revenue annually, and generates about $5 billion in revenue annually.
A company report detailing its earnings for last year and this quarter was released on November 4. The company’s revenue increased by 37% year-over-year to $1.3 billion, beating analyst expectations. Full-year revenue increased by 52%. According to adjusted earnings per share, net income was $488 million during the fourth quarter, and adjusted operating earnings were $2.62. Adjusted earnings per share for the fiscal year were $10.50, an increase of 71% over the previous year.
As part of the acquisition, Skyworks is taking over the infrastructure and automotive businesses of Silicon Labs. It will help Skyworks grow in the future. This fiscal year’s earnings per share are expected to be $11.57. It represents a 10% improvement over fiscal 2021.
Skyworks isn’t the most interesting as a dividend yield, but it still ranks among the top performers in the market. According to our estimates, Skyworks has a 10% growth potential, a reasonable price that is currently 7% below fair value.
Dividend Stocks: Microchip Technology Incorporated
The final stock we will hold is Microchip Technology. Various semiconductor products are developed, manufactured, and sold by this company. Microchip develops microcontrollers for general purpose, automotive, industrial, and embedded applications. Additionally, the company offers connectivity, computing applications, as well as various other related products.
The Microchip was founded in 1989, generates nearly $6 billion annually, and is valued at $46 billion. On November 4, Microchip reported its second-quarter earnings, which showed a very big improvement over last year. In the third quarter, $1.65 billion was generated, an increase of 26% over the previous quarter.
A large backlog of orders and strong underlying demand contributed to the company’s higher revenue. Gross margins were 65.3% of revenue in the quarter, producing a record adjusted net income of $1.07 per share. It would easily mark a record year for earnings for the company, as our earnings-per-share estimate has been raised to $4.50 for this year.
From here, Microchip expected to grow earnings per share by 12% annually, resulting in substantial returns. In the coming years, the valuation of the company’s stock is likely to have no impact on its stock price.
The dividend yield is slightly below the market’s 1.1%, so it doesn’t provide a huge income. Despite this, we still expect shareholders to enjoy annual returns of 12%+ in the coming years.
When choosing long-term investments, investors have many options. A good pick is a stock that combines more than one positive characteristic. Compounding is usually fastest when growth and income involved.
Tech stocks haven’t been known for paying dividends. Many tech stocks are now paying dividends to shareholders, which has changed over the past decade. The most common dividend investments are utilities or real estate investment trusts.
Taking advantage of what should be strong growth rates in the coming years, all three top tech stocks discussed above can generate income. In our opinion, all three of these under-the-radar tech stocks are buys, and they are expected to produce strong returns.