For many years, tech stocks as a group mostly did not pay dividends to shareholders. Technology companies needed to retain every dollar to reinvest in growth.

The NASDAQ 100 list now contains many quality dividend stocks with strong yields. 

These 3 dividend stocks have high yields above 3%, and the future growth potential of operating in the technology sector.

HP Inc. (HPQ)

HP Inc. has centered its business activities around two main segments: its product portfolio of printers, and its range of so-called personal systems, which includes computers and mobile devices. HP reported its second quarter (fiscal 2024) results on May 30th. The company reported revenue of $12.8 billion for the quarter, which beat the analyst consensus estimate, and which was down 1% from the previous year’s quarter. 

This was slightly better than the revenue decline that HP experienced during the previous quarter, when revenues were down by 5% on a year-over-year basis. 

Non-GAAP earnings-per-share totaled $0.82 during the second quarter, which was ahead of the analyst consensus estimate. HP Inc. saw its operating margin improve over the last year. The company currently forecasts earnings-per[1]share in a range of $0.78 to $0.92 for the third quarter, which would mean a better result versus the most recent quarter at the midpoint of the guidance range.

During the last couple of years HP’s earnings-per-share rose thanks to a combination of growing net earnings and a declining share count, although the huge growth rate from 2017 to 2019 likely will not be replicated forever, as some one-time items such as tax law changes impacted results positively. HP is a leader in the printing and personal computing markets, but these are areas that face challenges as consumers continue to shift to mobile devices. 

The adoption of 3D printing could help, as HP is already entrenched in this industry, but so far the majority of profits are generated by traditional printers and printing products. Even without any meaningful business growth, corporations can still generate growth on a per-share basis using shareholder return programs. Through a rapid pace of share repurchases, HP has a good chance of growing its earnings-per-share meaningfully going forward.

The dividend looks quite safe today, as it is easily covered by both profits and cash flows. HP pays out a large amount of cash to its owners via share repurchases, which have been a major growth driver for its earnings-per-share in the past. HP stock currently yields 3.1%.

Cisco Systems (CSCO)

Cisco Systems is the global leader in high performance computer networking systems. The company’s routers and switches allow networks around the world to connect to each other through the internet. Cisco also offers data center, cloud, and security products. 

On March 18th, 2024, Cisco completed its $28 billion purchase of cybersecurity company Splunk. On May 15th, 2024, Cisco announced results for the third quarter of fiscal year 2024. For the quarter, revenue declined 12.8% to $12.7 billion, but this was $70 million ahead of estimates. 

Adjusted earnings-per-share of $0.88 compared unfavorably to adjusted earnings-per-share of $1.00 in the prior year, but this was $0.06 more than anticipated. This was the first quarter that included the company’s acquisition of Splunk, which contributed $4.3 billion to the annualized recurring revenue total of $29.2 billion. For the most recent quarter, Networking fell 27%, Security grew by 36%, Collaboration was flat, and Observability was improved 27%. 

Cisco repurchased 26 million shares at an average price of $49.22 during the quarter. The company’s remaining share repurchase authorization is $7.2 billion, or 3.7% of the current market cap. 

Cisco provided an updated outlook for fiscal year 2024 as well, with the company now expecting revenue in a range of $53.6 billion to $53.8 billion, compared to $51.5 billion to $52.5 billion, $53.8 billion to $55 billion, and $57 billion to $58.2 billion previously. 

Cisco is in a prime position to capitalize on the Internet of Things. In fact, Cisco is responsible for 80% of all the data moved over the internet in the past 30+ years. While Cisco continues to enjoy hardware dominance, the company is attempting to become more of a subscription services company. This should help create more predictable revenue streams.

CSCO stock currently yields 3.5%.

International Business Machines (IBM)

IBM is a global information technology company that provides integrated enterprise solutions for software, hardware, and services. IBM’s focus is running mission critical systems for large, multi-national customers and governments. It typically provides end-to-end solutions. The company now has four business segments: Software, Consulting, Infrastructure, and Financing. IBM had annual revenue of ~$61.9B in 2023. 

IBM reported results for Q1 2024 on April 24th, 2024. Companywide revenue rose 3% (CC) to $14,462M from $14,252M while diluted adjusted earnings per share climbed 24% to $1.68 from $1.36 on a year-over-year basis. Diluted GAAP earnings per share increased 66% to $1.69 in the quarter from $1.02 in the prior year, which was affected by charges. Also, IBM’s revenue and earnings are being impacted by the strong U.S. dollar causing a 1.5% headwind.

 Software revenue increased 5.9% to $5,899M from $5,591M in comparable quarters due to 7% growth in Hybrid Platform & Solutions and a 4% increase in Transaction Processing. Revenue was up 9% for RedHat, 13% for Automation, 1% for Data & AI, and (-3%) for Security. 

IBM continued its tuck-in acquisition spree. After acquiring software company Apptio for $4.6B, expanding its AI offering, the firm made an offer for Hashicorp to grow its infrastructure and security automation business. IBM has acquired 35+ companies under the present CEO. IBM forecasts revenue growth in the mid-single-digits and free cash flow of about $12 billion in 2024.

IBM’s competitive strength is its brand, entrenched customer relations and extensive patent portfolio. IBM is also the market leader in mainframe computers where it has 90% of the market and little competition. IBM is a different company after the Kyndryl spin off, but it should still be recession resistant. The nature of mission critical IT enterprise systems and software makes this unlikely to change in the near future.

IBM has increased its dividend for 29 consecutive years and shares currently yield 3.9%.