Top 5 AI Stocks That Also Pay Dividends

Despite impressive returns and surging valuations, Wall Street analysts continue to expect further upside to AI stocks amid a growing appetite for generative AI software and IT infrastructure solutions worldwide. Analysts at UBS estimate that revenues in the AI industry will grow from $28 billion in 2022 to $420 billion in 2027, at a 72% CAGR during the period. AI infrastructure spending, on the other hand, is estimated to grow at a 50% CAGR to hit $195 billion by 2027.

The AI and tech industry is now alluring for income investors, too. Tech companies, loaded with strong cash flows and powered by raging demand, have started announcing their dividend policies to woo investors. Earlier this year, Meta Platforms, Alphabet and Salesforce announced their first-ever dividends. 

There are many opportunities in the AI industry for those looking for that sweet spot between share price appreciation and steady dividend checks. Let’s look at some of the top AI stocks that also pay dividends.

IBM

IBM Common Stock IBM doesn't get much limelight in the AI arms race, but analysts believe the company has a lead in AI-related innovation thanks to its Watson platform’s natural language processing skills. The company is also expanding its AI footprint through partnerships and collaborations. Last month, IBM partnered with Amazon Web Services (AWS) to allow users to access Watsonx AI features and its data platform. IBM also partnered with Palo Alto Networks, enabling the California-based cybersecurity company to acquire IBM’s QRadar Software as a Service (SaaS) assets.

IBM has increased its dividend for 29 consecutive years, a feat only a few in the tech industry could match. With an over 3.9% yield, it’s a high-yield dividend stock.

Equinix

Equinix Inc. EQIX is on investors’ radar since the company provides data center solutions central to the AI ecosystem. As companies begin to develop and deploy generative AI applications, analysts believe Equinix is well-positioned to benefit from the rising demand for data centers and AI infrastructure solutions. Last month, investment firm UBS recommended investors pile into stocks that are exposed to the "AI value chain," including data centers and semiconductors. Equinix was one of the firm’s recommendations. UBS expects AI infrastructure spending to reach $195 billion by 2027.

Equinix pays a $4.26 per share quarterly dividend for a 2.2% yield. Over the past five years, Equinix’s dividend has increased at a CAGR of 11%.

Digital Realty Trust

Digital Realty Trust Inc. DLR is another notable data center AI stock that pays dividends. The Texas-based real estate investment trust (REIT) operates over 300 data centers across 25 countries. Last month, UBS Global Research added Digital Realty Trust to its list of stocks poised to benefit from the increasing AI infrastructure spend. Some of the top names in the tech industry, including Nvidia, AMD and Oracle, are using Digital Realty Trust’s data center and cooling solutions. During its first quarter earnings call, Digital Realty Trust’s management announced it was selected to host one of the most powerful AI supercomputers in its Denmark data center.

During the first quarter, Digital Realty Trust’s funds from operations (FFO) was $1.67, surpassing the Wall Street consensus estimate of $1.62. The company maintained its 2024 FFO guidance of $6.60-$6.75. Since 2005, Digital Realty Trust has increased its dividends at an annual growth rate of 10%. The stock's dividend yield is 3.26% as of June 11 market close.

Texas Instruments

Texas Instruments Inc. TXN is in the news after billionaire Paul Singer’s Elliot Management opened a $2.5 billion activist stake in the semiconductor company, pushing the company to set a target of free cash flow (FCF) per share of $9.00+ by 2026. In an open letter to Texas Instruments’ board of directors, Elliot said Texas Instruments’ shareholder returns have "lagged peers" over the years. The fund also said Texas Instruments should decrease its spending, a move Wells Fargo analyst Gary Mobley called "unrealistic," citing the company’s fabs expansion plans in Texas and Utah.

Texas Instruments is one of the industry leaders in the analog chips market, which mainly addresses automotive and industrial chips. Citi analyst Christopher Danely recently said in a note that he sees a recovery in the analog chips market, led by Texas Instruments. Danely also sees an "upside" to the company’s revenue guidance.

Texas Instruments is also launching new AI-focused chips and solutions. The company has announced Sitara™ AM62 processors that power AI applications.

Texas Instruments is an attractive income stock for dividend investors with over 2.6% dividend yield and over two decades of dividend growth.

Intel

Intel Corp. INTC is seen as a laggard in the AI arms race, but the company is launching a slew of new products to catch up with competitors like Nvidia and AMD. Intel made waves at the Computex 2024 event by revealing Xeon 6 processing chips designed to handle AI-intensive data center workloads. In April, Intel pitched its AI accelerator Gaudi 3 chips as an alternative to Nvidia’s H100 to train large language models (LLMs) and process generative AI workloads.

Intel has been paying quarterly dividends since 1992. However, last year, the company slashed its dividend by 65%, its first dividend cut since 2000. Intel CEO Pat Gelsinger said the company would be back to growing dividends "over time" as he called for a "prudent" allocation of capital to increase Intel’s earnings.

Looking For Higher-Yield Opportunities?

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For instance, the Ascent Income Fund from EquityMultiple targets stable income from senior commercial real estate debt positions and has a historical distribution yield of 12.1% backed by real assets. With payment priority and flexible liquidity options, the Ascent Income Fund is a cornerstone investment vehicle for income-focused investors. First-time investors with EquityMultiple can now invest in the Ascent Income Fund with a reduced minimum of just $5,000.

Don't miss out on this opportunity to take advantage of high-yield investments while rates are high. Check out Benzinga's favorite high-yield offerings. 

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