tech stock dividends

3 Tech Stocks Growing Dividends at A High Rate

The technology sector is not closely associated with dividend payouts. Instead, the Technology sector is more closely connected with growth stocks.

However, this has changed somewhat in recent years, and now, many technology stocks pay dividends to shareholders. And, thanks to their strong profitability and free cash flow, tech stocks can grow their dividends at a high rate each year. 

This article will discuss three tech stocks that combine growth and dividends.


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3 Tech Stocks Growing Dividends

Microsoft Corporation (MSFT)

Microsoft is a tech giant that develops and sells software and hardware to businesses and consumers. Its products and services include operating systems, software development tools, business software, video games and gaming hardware, and cloud services. 

Microsoft reported (1/30/24) financial results for the second quarter of fiscal 2024 (its fiscal year ends June 30th) in late January. The company accelerated its performance and grew revenue by 18% over last year’s quarter. Sales growth came from Intelligent Cloud and Productivity & Business Processes, which grew 20% and 13%, respectively. 

Sales of Azure, Microsoft’s high-growth cloud platform, rose 30%. As a result, earnings-per-share rose 26%, from $2.33 to $2.93, and exceeded the analysts’ consensus by $0.16. Microsoft has surpassed the analysts’ consensus in 20 of the last 22 quarters. 

The tech giant has grown its earnings-per-share at a 15.8% average annual rate over the last decade. Organic expansion, as well as acquisitions, will drive future growth. Microsoft purchased Activision Blizzard (ATVI), a video game development and content leader, for $68.7 billion. 

Separately, Microsoft’s cloud business is snowballing thanks to Azure, which has increased tremendously. The Office product range, a low-growth cash cow for years, showed strong growth after Microsoft changed its business model for the Office 365 to software-as-a-service (SaaS).

The dividend payout ratio has never risen substantially above 50%, and the fact that Microsoft has one of the most robust balance sheets in the world means that the dividend is very safe. MSFT has increased its dividend for 22 consecutive years, making it a Dividend Contender, and currently yields 0.7%.

Portfolio Insight - Dividend Growth MSFT
Source: Portfolio Insight

Related Articles About Microsoft on Dividend Power

Broadcom Inc. (AVGO)

Broadcom designs and sells semiconductors under the following business units: wired infrastructure, wireless communication, enterprise storage, and industrial. Its products include data center chips, factory automation, energy systems and power generation, broadband access, and home connectivity. Broadcom is our second high dividend growth rate tech stock.

Broadcom reported its fourth quarter earnings results on December 7th. The company generated revenues of $9.3 billion during the quarter, representing an increase of 4% compared to the prior year’s quarter. The solid revenue growth performance was because of beating expectations in the semiconductor solutions unit, while its infrastructure software business also generated substantial growth. 

Broadcom reported earnings-per-share of $11.06 for the fourth quarter, which was ahead of consensus estimates. The company expects revenues to come in at around $50 billion during the current fiscal year, representing a nice revenue increase compared to the previous year.

Broadcom’s largest market is wireless communication, where the company owns a leading connectivity portfolio, including advanced LTE, Bluetooth 5.x, Wi-Fi, GPS, Galileo, etc. Broadcom is also well positioned in the enterprise storage market, providing switching and other connectivity solutions and storage products like SSD controllers.

We expect the company to grow its EPS by 7% per year going forward. Broadcom is a shareholder-friendly company. It has raised its dividend for 13 consecutive years. Between 2010 and 2021, Broadcom increased its dividend by an incredible factor of more than 100. 

However, Broadcom’s cash dividend still looks relatively safe, as it is well-covered. The stock has a projected 2024 dividend payout ratio of approximately 45%. AVGO stock currently yields 1.7%.

Portfolio Insight - Dividend Growth AVGO
Source: Portfolio Insight

Analog Devices (ADI)

Analog Devices makes integrated circuits sold to original equipment manufacturers (OEMs) to be incorporated into equipment and systems for communications, computer, instrumentation, industrial, military/aerospace, and consumer electronics applications. It is third on our list of tech stocks with high dividend growth rate.

ADI earns about 50% of its revenues from products they’ve been selling for ten years or more. The business is also changing to meet the needs of new markets with its $10 billion investment in Research and Development over the past ten years and its previous acquisitions of companies like Maxim Integrated, Linear Technology, and Hittite. 

On February 21st, the company beat the top and bottom line estimates for its fiscal Q1 2024 results. Revenue of $2.51 billion fell 23% year-over-year. Adjusted earnings-per-share of $1.73 declined 37% year-over-year. Free cash flow of $916 million represented 36% of quarterly revenue.

During the quarter, Analog Devices returned $606 million to shareholders, consisting of share repurchases of $180 million and dividends of $426 million. Separately, the company increased the quarterly dividend rate by 7% and has now increased dividend payments to shareholders for 20 consecutive years.

Over the past five and nine years, Analog Devices has grown earnings-per-share at an average rate of 11.1% and 17.3% annually, respectively. The business targets a long-term annual revenue growth rate of 7% to 10% as it continues to build on its leading markets and benefits from secular trends like Industry 4.0, which implements machine learning tools into factory production, data centers, and augmented and virtual reality.

Analog sees growth coming from Industry 4.0 trends in its industrial segment and in the EV market for its automotive segment. Over the intermediate term, we expect earnings per share to grow at 16.5% annually over the next five years, guiding our 2029 earnings-per-share estimate of about $15.11.

The company’s low payout ratio below 50% makes us believe the dividend is safe and will continue growing. ADI stock currently yields 1.8%.

Portfolio Insight - Dividend Growth ADI
Source: Portfolio Insight

Disclosure: Members of the Sure Dividend team are long the stock discussed.

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Bob Ciura
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Bob Ciura is President of Content at Sure Dividend. Bob has worked at Sure Dividend since October 2016. He oversees all content for Sure Dividend and its partner sites. Prior to joining Sure Dividend, Bob was an independent equity analyst. Bob received a bachelor’s degree in Finance from DePaul University, and an MBA with a concentration in Investments from the University of Notre Dame.

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