Microsoft Corporation (MSFT), QUALCOMM, Inc. (QCOM): Find Great Dividend Stocks in an Unexpected Place

The best of both worlds

A stock with a compelling combination of a high yield and high dividend growth is Texas Instruments Incorporated (NASDAQ:TXN). In fact, Texas Instruments recently announced it was handing its investors a double-dose of cash rewards. Not only did the company announce a new $5 billion share repurchasing authorization, but it also raised its common stock dividend by a full third. The stock’s new dividend of $1.12 per share represents a yield of 3.2% at recent prices.

Texas Instruments’ huge dividend increase isn’t a one-off, either. The company has a long track record of handsomely rewarding its shareholders through both dividends and share buybacks. Last year, Texas Instruments bought back $1.8 billion worth of shares and has repurchased its own shares opportunistically for many years. Since 2005, the company has reduced its shares outstanding by 36%. Moreover, Texas Instruments has increased its dividend by 23% compounded annually over the past five years.

The Foolish takeaway

Many of the major players within the technology sector have transformed themselves into rank-and-file dividend payers. Even inside tech, there is a mixture of companies each in a different stage of the dividend life cycle. It’s entirely possible to craft a technology portfolio that consists of higher-yielding, slower dividend-growth stocks along with those that have lower starting yields but more rapid dividend growth.

Each of these stocks offer dividend yields between 2% and 4% that are easily covered with free cash flow. Since technology stocks traditionally have low levels of debt, there’s little reason to believe these payouts can not only be sustained, but increased in the future at rates that surpass the level of dividend growth of most other stocks. Texas Instruments offers its investors a compelling mixture of a high current yield as well as extremely high dividend growth.  While Microsoft and QUALCOMM, Inc. (NASDAQ:QCOM) are highly profitable and intriguing buys, Texas Instruments appears to have the edge.

The article Find Great Dividend Stocks in an Unexpected Place originally appeared on Fool.com and is written by Robert Ciura.

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