Technology stocks are among the most popular in the stock market because of their growth potential. As it stands, technology companies are seven of the ten largest listed companies in the world by market capitalization. Undoubtedly, technology stocks can rise sharply in short periods of time, but investors should not invest with them; the emphasis should be on the long-term potential.
If you have $3,000 available to invest, here are three tech companies you can buy and hold for the long term. Investing €3,000 between the three gives you exposure to high growth potential, reliable dividends and a good combination of both.
There are not many companies in the world that are as well positioned as Microsoft (NASDAQ: MSFT) for sustainable growth over time. Although the company has been around since 1975, Microsoft’s growth opportunities remain high as it moves into several fast-growing segments, such as cloud computing services.
In fiscal 2023 (ending June 30), Microsoft posted $211.9 billion in revenue, up 7% year over year. That’s more than Sales team And McDonald’s total market capitalization. In the fourth quarter, Microsoft’s revenue rose 8%, but I’m more impressed by its net income growth, which rose 20% year over year.
Microsoft’s increasing profitability and margins can be attributed to its growing software offering. Physical products like PCs and phones require additional costs with each additional unit sold, but software can generate recurring revenue through subscriptions with minimal additional costs per consumer. Microsoft’s gross margin rose 11% in the fourth quarter, led by Microsoft Cloud’s 72% growth.
Many technology companies have diverse revenue streams, but few are as diverse as Microsoft’s. The company is woven into the fabric of the corporate world in a way that all but guarantees its longevity. It trades at a premium valuation, but that shouldn’t deter long-term investors.
Find me someone who has one AT&T (NYSE:T) investor over the past five years or so, and I’ll show you that someone is more than likely disappointed with the results. Over the past five years, AT&T shares are down more than 40%, and are down almost 20% this year.
Fortunately, the main selling point for AT&T investors is the company’s dividend, which is among the highest in the US S&P500. The trailing twelve month dividend yield is just under 7.3% and the quarterly payout is currently $0.28 per share.
The dividend yield fluctuates with the share price, so there’s no guarantee it will stay that high. But I would invest $1,000 in AT&T, expecting to receive at least $70 a year in dividends.
Things have been tough for AT&T, as the company has faced setbacks (such as its media and entertainment ambitions) and heavy debt, but its current valuation gives it far more upside than downside. The company is still a cash cow, and there is something to be said about that. With a price-to-free cash flow multiple of just over 6.1, this looks like a bargain.
Telecom has become a necessity in American life and AT&T is the market leader. That by itself isn’t enough to justify an investment, but the company’s lucrative dividend and respectable cash flow should give investors confidence that AT&T is in a position to finally right the ship. All it takes is a little patience.
3. Semiconductor manufacturing in Taiwan
Taiwanese semiconductor manufacturing (NYSE: TSM)also known as TSCM, is the world leader in semiconductor (chip) production, with a 55% market share at the end of 2022.
Consumers may not interact directly with TSMC’s products, but there’s a good chance they own electronics that use the chips. They are in smartphones, car infotainment systems, data centers and countless other electronics.
The global chip market is expected to get a boost from AI-related activities, and TSMC should be one of the main beneficiaries. The global market for AI chips was valued at just under $15 billion in 2022 and is expected to reach over $383 billion by 2032, representing a compound annual growth rate of over 38%.
Companies like Nvidia will rely heavily on TSMC to produce chips for their GPUs, which power many of the data centers critical to AI. TSMC is on track to ship approximately $22 billion worth of one product, the H100 Hopper GPU, this year alone.
TSMC presents a two-for-one argument for investors: high growth opportunities and an above-average dividend. The dividend yield over the last twelve months is 2%, which is not necessarily striking, but still more than the S&P 500 average.
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Stefon Walters has positions at McDonald’s and Microsoft. The Motley Fool holds positions in and recommends Microsoft, Nvidia, Salesforce, and Taiwan Semiconductor Manufacturing. The Motley Fool recommends T-Mobile US and Verizon Communications. The Motley Fool has a disclosure policy.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.