3 Dividend Stocks for Long Term, When it comes to investing, what’s even better than high dividends? A dividend that not only offers a steady income but also has the potential to grow significantly over the long term. Warren Buffett’s Coca-Cola holdings serve as an excellent example, where a modest investment in the mid-1980s has grown into substantial annual dividends of $736 million today, equating to a 57% (and rising) yield on his initial investment. This underscores the significance of looking beyond the current dividend yield and focusing on the prospects for 3 Dividend Stocks for Long Term growth. In this article, we’ll explore 3 Dividend Stocks for Long Term Growth promising potential.
3 Dividend Stocks for Long Term
1. Broadcom: Navigating the Tech Landscape
Broadcom (NASDAQ: AVGO) is a tech giant that’s made headlines recently due to a 5% decline in its share price following a decent but not outstanding earnings report. The dip in Broadcom’s shares can be attributed to various factors, including profit-taking as long-term interest rates increased. Additionally, there were reports suggesting that Google might shift away from Broadcom’s ASIC technology to either an in-house design or competitor Marvell.
However, Google promptly refuted these reports, emphasizing the ongoing collaboration with Broadcom. Broadcom’s strength lies in its market-leading Tomahawk and Jericho chips for switches and routers. These networking platforms are in high demand due to the rapid data networking needs of AI training and inference.
Furthermore, Broadcom’s impending acquisition of VMware (NYSE: VMW) in October is poised to expand its software portfolio and strengthen its position in multicloud hybrid-computing infrastructure. Over the years, Broadcom has demonstrated its ability to enhance margins through strategic acquisitions. While its current dividend yield stands at 2.3%, it has grown at an impressive 38% annualized rate since 2016. With the tailwinds of AI and a significant acquisition on the horizon, Broadcom is set to continue its robust dividend growth in the future.
2. Microchip: Riding the Waves of Tech and Industry
Microchip (NASDAQ: MCHP) is another semiconductor company with a focus on microcontrollers and analog chips, making it well-positioned to benefit from the increasing demand for computing in data centers. While its data-center revenue constitutes a smaller portion of its business compared to Broadcom, Microchip also enjoys exposure to the megatrend of industrial computing, driven by the Internet.
Despite the contraction in the chip sector last year, Microchip sustained its growth due to the high demand for its auto and industrial chips during the 2021 shortages. However, the recent softening of demand in China has led to a pullback in the stock. Nonetheless, Microchip’s long-term growth potential remains intact, supported by its broad exposure to emerging technology trends. The company has a strong historical growth rate, with a 16.4% compounded revenue growth over the past 30 years. In the next five years, it anticipates organic growth between 10% and 15%.
For dividend investors, there’s more good news. Microchip has been consistently increasing its 1.94% dividend on a quarterly basis, thanks to achieving its leverage target and reducing its debt load. The company aims to return 100% of free cash flow to shareholders by March 2025, indicating substantial dividend growth in the coming years.
3. Ubiquiti, Inc.: A Hidden Gem in Tech
Ubiquiti, Inc. (NYSE: UI) may not be on every investor’s radar, primarily due to its lack of earnings calls with public shareholders and founder and CEO Robert Pera’s substantial ownership of over 93% of the shares. Despite this insider ownership, Ubiquiti’s shares have experienced a significant 47% decline in 2023, resulting in a dividend yield of 1.6%.
Ubiquiti specializes in switches, WiFi access points, security cameras, and smart doorbells, catering to small business installers and tech enthusiasts. The company distinguishes itself by offering high-quality equipment at competitive prices, leveraging a lean operational model with a focus on top-quality engineering.
However, Ubiquiti faced challenges in recent years, including component shortages in 2021 that impacted gross margins. In response, Pera invested heavily in building inventory, leading to increased debt and a subsequent stock selloff. Now that inventory levels are healthier, Ubiquiti’s growth and financials are expected to stabilize. The company’s commitment to high returns on capital, a CEO with a long-term vision, and a devoted user base make it an attractive investment opportunity. Currently trading at just 15 times next year’s earnings estimates, Ubiquiti offers a compelling entry point for investors.
In conclusion, 3 Dividend Stocks for Long Term – Broadcom, Microchip, and Ubiquiti – present promising opportunities for long-term growth, offering a blend of dividends and potential for capital appreciation. As the technology sector continues to evolve, investors should consider these stocks for their investment portfolios.3 Dividend Stocks for Long Term 3 Dividend Stocks for Long Term 3 Dividend Stocks for Long Term