The growing appetite for artificial intelligence (AI) is anticipated to inject trillions into the global economy, largely due to the productivity improvements it is expected to generate. Reflecting on the substantial gains achieved by early investors in companies like Microsoft and Intel during the personal computer boom three decades ago, AI presents a similar opportunity for investors aiming to select the right stocks.
While AI growth stocks are attractive, it’s also wise to consider investing in profitable AI firms that offer dividends, particularly for those with a long-term investment horizon.
Here are three AI dividend stocks showing significant promise for rewarding long-term investors:
1. Nvidia
Nvidia (-0.03%) is capitalizing on a significant shift within data centers towards accelerated computing to effectively manage AI training and inferencing. In the last quarter, Nvidia’s revenue more than doubled compared to the same period last year, propelled by the heightened demand for its graphics processing units (GPUs), essential for AI model training.
Nvidia is poised for even stronger growth in the coming year. It is on track to release its next-generation Blackwell computing platform, which aims to elevate processing capabilities. Future AI models will necessitate 10 to 20 times more computing power, and Nvidia is prepared to furnish the hardware required for the $1 trillion worth of data centers needed for this advancement.
Many investors might not be aware that Nvidia has consistently paid a dividend for over a decade and increased its quarterly payout by 150% this year. Although the quarterly dividend of $0.01 per share might seem modest, it underscores the remarkable growth in the company’s profitability.
Nvidia’s trailing-12-month free cash flow surged to an impressive $46 billion, quadrupling from the previous year. The company’s robust growth prospects and profitability could lead to substantial dividend increases over the next decade, in addition to the potential appreciation in share price.
2. Dell Technologies
The recent dip in Dell Technologies’ (1.92%) share price presents an opportunity to acquire the stock at an above-average yield, considering the potential recovery in the PC market and heightened demand for AI servers.
Dell’s primary revenue streams are client solutions, including PC sales, and infrastructure solutions, featuring its rapidly expanding AI server business. Despite difficulties in the PC market due to macroeconomic challenges, management is optimistic about a potential recovery in the near future, with Microsoft’s Windows 10 reaching its end-of-life, prompting necessary upgrades.
AI opportunities alone could propel the stock higher. Dell enjoys a significant advantage in the AI server market, which Statista forecasts will expand tenfold over the next decade. By integrating advanced server technology with additional services, Dell has established itself as a leading supplier. The company reported a 38% year-over-year increase in its infrastructure solutions group last quarter.
Analysts project Dell’s earnings will grow at an annualized rate of 12% over the coming years, likely leading to increasing dividends. Earlier this year, Dell raised its quarterly dividend by 20%, now paying $0.445 per share.
The current dividend results in a forward yield of 1.68%, surpassing the S&P 500 average of 1.32%. The above-average yield and a modest forward price-to-earnings (P/E) ratio of 13 suggest that the stock is undervalued, making it an excellent buy ahead of further growth in the server market.
3. Meta Platforms
Meta Platforms (-0.19%), the parent company of Facebook and Instagram, benefits from a lucrative digital advertising business that is significantly enhanced by AI technology. The social media giant launched its inaugural quarterly dividend in Q1, reflecting Meta’s promising long-term prospects and management’s confidence in the returns stemming from its AI investments.
A growing debate questions whether enterprises are reaping benefits from their substantial AI infrastructure investments. Meta can affirmatively respond, having successfully integrated AI across Facebook and Instagram, enhancing content recommendations and user experience. This integration has positively impacted advertising spending and revenue growth.
In Q2, Meta reported a 22% year-over-year revenue increase, doubling the growth rate of the previous year. As a key player in AI with its Llama generation of large language models, Meta has advanced this technology while maintaining a regular dividend payout to shareholders, indicating a prosperous future in the AI era.
Meta’s current quarterly dividend is $0.50 per share, resulting in a forward yield of 0.4%. Investors can anticipate the company’s robust growth to drive substantial increases in the quarterly dividend over the coming years.
Analysts predict Meta’s earnings will grow by 18% annually in the foreseeable future. With an average forward P/E of 23, investors can expect substantial returns along with an increasing dividend.
Don’t miss out on this second chance at a potentially rewarding opportunity
Ever felt like you missed your chance to invest in some of the most successful stocks? Here’s some good news.
Occasionally, our expert team of analysts issues a “Double Down” stock recommendation for companies they believe are on the brink of significant growth. If you’re concerned that you’ve already missed the opportunity, now is an ideal time to invest before it’s too late. The numbers speak for themselves:
Nvidia: Investing $1,000 when we doubled down in 2009 would have grown to $308,911!*
Apple: A $1,000 investment at our 2008 double down would now be worth $42,142!*
Netflix: A $1,000 investment from our 2004 double down would have reached $370,385!*
Currently, we are issuing “Double Down” alerts for three remarkable companies, and such an opportunity may not arise again soon.
Discover 3 “Double Down” stocks ›
*Stock Advisor returns as of 09/14/2024
