Many companies keep all their profits to finance their expansion. However, some are so profitable that they have more money than they need to grow their business. That allows them to return some money to their investors, which they can do by buying back shares and paying dividends.
Even though billions of dollars have been invested in it artificial intelligence (AI)leaders like Broadcom (NASDAQ:AVGO), Microsoft (NASDAQ: MSFT)And Metaplatforms (NASDAQ: META) all pay dividends. This allows investors to benefit from the best of both worlds. They get paid income while benefiting from that megatrend. While that revenue stream may be small now, it could grow in the future while these companies benefit from AI.
Not your average dividend
Broadcom reports quarterly results dividend payment of $0.53 per share to its investors. At the recent share price of around $180, the… semiconductor and software company has a share of 1.2% dividend yield. That’s about average, considering S&P500‘S The dividend yield is around that level. At that rate, every $1,000 invested in Broadcom stock would return about $12 dividend income every year. The more you invest, the more income you can receive.
What’s remarkable about Broadcom’s dividend is its growth. The company achieved its 13th consecutive dividend increase late last year, increasing its payout by 14%. It has delivered incredible dividend growth over that period:
AVGO Dividend Data by YCharts
Broadcom should be able to continue increasing its dividend at a rapid pace. The company’s revenue rose 43% year over year in the second quarter, while free cash flow rose 18%. The acquisition of VMware was a major driver. However, it still is growing fast without that accelerator, powered by a record $3.1 billion in revenue from AI products. In concrete terms, sales increased by 12% after excluding VMware. With more AI-powered growth on the horizon, Broadcom should be able to continue increasing its dividend at an above-average pace.
A smaller yield, but powerful fine grow
Microsoft recently announced its latest quarterly dividend. The tech giant increased its payment by 10% every quarter to $0.83 per share. That brings the dividend yield to about 0.8% at the recent share price.
Although Microsoft offers a low dividend yield, it has achieved a high dividend growth rate. The country has increased its benefits for 19 years in a row, growing at an annual rate of more than 10% over the past decade.
Microsoft is in a great position to continue paying a growing dividend. The company has a low dividend payout ratio, which allows it to retain cash to grow its business and buy back shares. The board of directors recently approved an authorization to repurchase new shares for an amount of up to $60 billion. Meanwhile, the company is investing heavily in AI, included to invest billions of dollars ChatGPT Creator Open AI to access that technology and help it deliver leading AI products and services. These investments should continue to increase cash flow and the ability to pay dividends.
New with a lot of potential
Meta Platforms just started paying dividends this year. The social media giant introduced a quarterly dividend of $0.50 per share in February. At the current share price, it has a dividend yield of around 0.3%.
Although Meta Platforms has a relatively new dividend and low yield, it has a lot of potential. The company starts small so it can invest heavily in AI. It launched its own AI assistant, Meta AI, earlier this year, which it expects will be the most widely used AI assistant by the end of the year. It’s also launching AI tools for advertisers, which CEO Mark Zuckerberg thinks: “goes to are a very large one agreement.”
It will take some time for Meta to monetize some of its AI products. However, it has an excellent track record in building, scaling and Than cashing in on his investments. Therefore, AI could be a huge profit growth driver for the company in the long term. It should enable Meta Platforms to grow its dividend at a meaningful pace in the coming years.
Take advantage of the AI boom
Many emerging AI companies need to keep all their profits so they can continue to invest in technology. However, Broadcom, Microsoft and Meta Platforms are so profitable that they make enough money to invest in AI and pay dividends to their investors. They are great AI stocks to buy for those looking to raise some money while benefiting from this megatrend.
Don’t miss this second chance at a potentially lucrative opportunity
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*Stock Advisor returns October 14, 2024
Randi Zuckerberg, former director of market development and spokeswoman for Facebook and sister of Mark Zuckerberg, CEO of Meta Platforms, is a member of The Motley Fool’s board of directors. Matt DiLallo has positions in Broadcom and Meta Platforms. The Motley Fool holds positions in and recommends Meta Platforms and Microsoft. The Motley Fool recommends Broadcom and recommends the following options: long January 2026 $395 calls to Microsoft and short January 2026 $405 calls to Microsoft. The Motley Fool has a disclosure policy.
