A small dividend today can become a much bigger paycheck tomorrow.
For income investors, that is where dividend growth starts to matter. In technology, companies that can steadily raise payouts while still keeping enough earnings to fund their businesses can offer an interesting balance of income and growth.
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With that in mind, I screened the S&P 500 Information Technology sector for stocks that have strong five-year dividend growth and payout ratios below 50%.
How I Came Up With These Stocks
Using Barchart’s Stock Screener, I selected the following filters to get my list:
Screenshot courtesy of www.barchart.com 5-YR Dividend Growth (%): 1% and up. Dividend Payout Ratio (%): Maximum 50% to filter companies that are not overextending their business to cover dividends. Number of Analysts: At least 12 because more coverage suggests a stronger rating consensus. Current Analyst Rating: I'm looking for stocks rated “Moderate” to “Strong Buy” by Wall Street analysts. Index Groups: S&P 500 Info Tech. I ran the screen and got 59 results, then arranged them from highest to lowest 5-year dividend growth. So here are the top three:
Screenshot courtesy of www.barchart.com Monolithic Power Sys (MPWR)
Screenshot courtesy of www.barchart.com Monolithic Power Systems develops power-management chips used in automotive, computing, and other industries. Its business is also benefiting from the rise of AI, as increasingly powerful computing systems require more efficient ways to manage electricity.
The company pays a forward annual dividend of $8.00 per share, translating to a yield of almost 0.7%, though it grew the most, 212% over the past five years.
Its dividend payout ratio of ~42% means the company pays out less than half of its earnings as dividends, leaving room to reinvest in the business while potentially supporting future dividend growth.
Screenshot courtesy of www.barchart.com Wall Street is also bullish, with a consensus among 14 analysts rating the stock a “Strong Buy”, while the high price target implies as much as 77% upside over the next year.
Amphenol Corp (APH)
Screenshot courtesy of www.barchart.com Amphenol Corp. makes connectors, cables, and sensors used across automotive, aerospace, and computing markets. As chips become more powerful, they still need reliable connections to move power and data, giving Amphenol an important role in AI servers and data centers.
In terms of dividends, the company pays shareholders $0.50 annually, which translates to a yield of about 0.6%. That said, its dividends rose 185% over the past five years, and with a low dividend payout ratio of around 20%, the company has plenty of room to increase them in the future.
Screenshot courtesy of www.barchart.com Meanwhile, a consensus among 16 analysts rates the stock a “Strong Buy” with as much as 43% upside over the next year based on its high target price.
NXP Semiconductors (NXPI)
Screenshot courtesy of www.barchart.com NXP Semiconductors makes chips widely used in modern vehicles. It also serves industrial and connected-device markets, but automotive remains a key part of the story as cars continue adding more electronics and computing power.
At the time of publication, NXP pays $4.06 per share annually, translating to a yield of around 1.8% - the highest on this list. And over the past five years, its dividends have grown 171% all while maintaining a healthy payout ratio of ~35%. That could also mean potentially higher payouts over the coming years.
Screenshot courtesy of www.barchart.com Finally, a consensus among 26 analysts rates the stock a “Moderate Buy” with substantial upside of as much as around 77% if the high target price is reached.
Final thoughts
These three stocks prove that dividend investing can actually offer some eye-opening ideas. MPWR, APH, and NXPI have all delivered strong dividend growth over the past five years while keeping their payout ratios below 50%, all while leaving room to reinvest in their businesses and potentially raise payouts further. Their high target prices also offer potentially significant upside over the next year.
On the date of publication, Rick Orford did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes. For more information please view the Barchart Disclosure Policy here.
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