The technology sector helps shape nearly every industry on the planet. That makes it a great place to look for stocks that have market-crushing growth potential, but the sector also plays host to companies with attractive returned-income components. Here's why investors seeking a combination of growth potential and dividends should consider adding Xilinx (NASDAQ: XLNX), Shaw Communications (NYSE: SJR), and Taiwan Semiconductor Manufacturing Company (NYSE: TSM) to their portfolios this month.
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If you're looking for dividend-paying tech stocks with products powering some of the most influential tech trends on the horizon, Xilinx deserves a spot on your short list. The semiconductor company is the leader in field programmable gate array (FPGA) chips, a class of semiconductors that can be reprogrammed by end users. The chip specialist also recently launched its adaptive compute acceleration platform (ACAP) family, a high-performance category of programmable chips built for artificial intelligence (AI) applications.
If a change needs to be made to a computing system, programmable chips allow it to be made with the existing hardware. This can save enterprises lots of time and money because it eliminates the need to swap out semiconductors to alter performance. The versatile nature of the company's chips makes them well suited for telecommunications, cloud computing, and artificial intelligence applications. The company's solutions are also used in the aerospace and defense industry.
Xilinx's FPGAs and ACAPs should see rising demand thanks to growth in 5G, AI, and data center applications, and this dynamic points to the stock having explosive potential. The chip specialist is facing pressures from delayed 5G rollouts, trade issues between the U.S. and China, and coronavirus-related slowdowns in enterprise spending, but its category-leading products and role in enabling big tech shifts have the company on track to be a long-term winner.
Shares are now up roughly 6.5% in 2020 amid some signs of improving conditions, and they still present attractive upside for investors willing to weather near-term headwinds. The stock trades off nearly 25% from the lifetime high it hit last year, and the company's dividend should make it easier to wait for the business's next big growth cycle.
Xilinx sports a dividend yield of roughly 1.5%, a nine-year streak of annual payout increases, and plenty of potential for capital appreciation as spending on 5G, artificial intelligence, and data center technologies accelerates.
Shaw Communications is a Canadian telecommunications company that provides cable, internet, wireline, and wireless phone services. It has a market capitalization of roughly $10 billion, trades at approximately 19 times this year's expected sales, and pays a dividend with a forward yield of roughly 4.7%. The company's payout typically shifts quarterly, but investors can still look forward to a sizable yield.
Even with the company paying a variable dividend, Shaw's yield has usually been above 4% over the last decade. Cord-cutting's impact on the cable business has meant that Shaw is spending to build stronger positions in internet and mobile wireless services and prepare for the shift to 5G, and these initiatives have left less cash available to return to shareholders.
Investors seeking big payout growth in the near term may want to look elsewhere, but the stock already has a hefty yield. The company has also reliably paid a quarterly dividend for over three decades, and shares present attractive value at current prices.
The telecom operates two different mobile services: Freedom Mobile and the recently launched Shaw Mobile. Freedom mobile is the company's budget-focused wireless service, while Shaw Mobile offers superior speeds and features.
Coronavirus temporarily shuttered most of the company's Freedom Mobile outlets, which hurt wireless growth last quarter. That headwind combined with cord-cutting pressures in the cable space has caused Shaw stock to slump roughly 8% year to date, but the business still looks pretty sturdy and has appealing defensive characteristics. The company's mobile stores are reopening, and the budget-focused Freedom Mobile could see a demand tailwind if a prolonged economic downturn prompts consumers' purse strings to tighten.
Taiwan Semiconductor Manufacturing Company
Some semiconductor companies concentrate solely on designing chips and outsource the fabrication process. Others have manufacturing capabilities but not enough to meet the demand for the variety of solutions they want to bring to market. That's where Taiwan Semiconductor Manufacturing Company comes in.
TSMC stands as the world's largest chip foundry, and it looks poised to benefit from a powerful confluence of industry tailwinds. Companies including Xilinx, NVIDIA, Broadcom, Marvell, Apple, and Intel, among many others, rely on the fabrication leader to produce their chips, and the demand outlook has never been better.
With phone manufacturers including Apple and Samsung gearing up for a new line of 5G-focused mobile devices, and telecommunications providers building up infrastructure to support the next-gen network technology, TSMC has a huge demand catalyst on the horizon. And that's just one of the tailwinds that look primed to boost business over the next decade.
While many previously hardware-based computing functions are being shifted to the cloud, the computer systems and servers powering the cloud still require powerful hardware in order to function. Cloud migration and resource-intensive applications such as artificial intelligence are spurring huge growth at data centers, and that means semiconductor companies are dialing up TSMC with large fabrication orders.
If those production tailwinds aren't enticing enough, consider the explosion of new connected devices that will enter the world over just the next decade alone. Even if self-driving vehicles take longer than expected to go mainstream, the market for smart cars with built-in, high-level computing capabilities will see significant growth. And don't forget about the wearable technology category. Devices including smartwatches and virtual and augmented reality headsets are potentially explosive growth markets that could drive business to Taiwan Semiconductor.
TSMC stock has a dividend forward yield of roughly 2.1%, it trades at roughly 25.5 times expected earnings, and the company's expansive customer base makes it an appealing vehicle for investing in the growth of the semiconductor industry and the broader technology sector.
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Keith Noonan has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends Apple, NVIDIA, and Taiwan Semiconductor Manufacturing. The Motley Fool recommends Intel and Xilinx. The Motley Fool has a disclosure policy.
3 Dividend-Paying Tech Stocks to Buy in September was originally published by The Motley Fool