Artificial intelligence has been the hottest market in 2024. AI has driven the rise in share prices for companies like Nvidiawhich has seen its stock rise nearly 180% in the past year to Dec. 31.
The growth of the AI market is not slowing down anytime soon. Forecasts estimate that the industry will grow at a staggering rate, from $184 billion in 2024 to over $826 billion in 2030.
A good way to capitalize on the AI boom is to invest in companies that are not only involved in artificial intelligence, but also pay a strong, reliable dividend. That said, not all AI stocks pay equal dividends. For example, Nvidia paid dividends, but an annual yield of 0.03 %.
So which AI companies have the biggest advantages? Three of them International Business Missions(NYSE: IBM), Cisco Systems(NASDAQ: CSCO)again Verizon Communications(NYSE: VZ). Here’s an in-depth look at one.
IBM offers many reasons to invest in its stock. Shareholders get a nice 3% yield, and the payouts are as reliable as you can hope. The company has paid quarterly dividends continuously since 1916 and has increased payouts over the past 29 years.
IBM smartly shifted its focus to cloud computing and AI in 2020. After the demand for AI started in 2023, IBM enjoyed an increase in revenue.
Data via YCharts.
IBM’s third-quarter sales related to generative AI rose more than $1 billion from the second quarter. This performance shows the strong demand for Big Blue’s AI.
The future of the company looks bright again. IBM is working on quantum computing, which uses subatomic particles to perform calculations at speeds unimaginable on the world’s most powerful supercomputers. If Big Blue can successfully scale up its quantum power, it could deliver the most advanced AI of any available today.
Cisco made its name in computer networking, and that behavior is more important than ever in the age of AI. AI systems require the computing power of many computers linked together to reduce the data required for the AI to function. And sending that AI to customers requires strong, reliable, and secure internet networks.
These are all areas Cisco is known for, and contributed to a 20% year-over-year increase in the company’s product orders in its first fiscal quarter, which ended October 26. This strong start to the fiscal year led the company to forecast. its 2025 revenue will fall between $55.3 billion and $56.3 billion, up from $53.8 billion in 2024.
CEO Chuck Robbins sees AI powering Cisco’s sales growth. He noted that businesses are investing in IT infrastructure to support the needs of AI systems. Because of this, the company is integrating its Cisco Silicon One platform into all of its products. Silicon One is the company’s custom semiconductor chip designed to deliver high speed and efficiency to support AI.
In addition, the stock offers a dividend yield of nearly 3%. Cisco has grown its dividends consistently for more than a decade.
Verizon’s involvement in AI is related to edge computing, which involves bringing AI to your devices, whether that’s your cell phone, laptop, or Internet-enabled car. These devices are at the edge, or edge of the computer network, hence the name.
Implementing edge computing requires a wireless network that is strong enough to handle large data loads with speed and security. That’s where Verizon’s 5G network comes in. The telecom has partnered with Nvidia exclusively to enable the use of AI in its network.
This capability is coming in 2025, but Verizon’s wireless service is already finding success. In Q3, its wireless service business saw sales rise 3% year over year to $19.8 billion. This segment contributed to the telecom’s Q3 total revenue of $33.3 billion.
Verizon is a dividend stock as well. Because almost everyone has a cell phone these days, a company can reliably generate free cash flow (FCF) to fund its profits. In the first three quarters of 2024, the company generated $14.5 billion in FCF, which is almost the same as 2023’s $14.6 billion, which shows its FCF consistency.
Thanks to strong FCF, Verizon has raised dividend payments for 18 consecutive years. In addition, its dividend yield is approximately 7% higher as of this writing.
With the growth of the AI market bringing a tailwind to IBM, Cisco, and Verizon, combined with their dividend yield, these companies are a great way to see a return on your AI investment. And you can collect income as the AI market grows over time.
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Robert Izquierdo has held positions at Cisco Systems, International Business Machines, Nvidia, and Verizon Communications. The Motley Fool has positions and recommends Cisco Systems and Nvidia. The Motley Fool recommends International Business Machines and Verizon Communications. The Motley Fool has a policy of disclosure.
3 Dividend-Paying Artificial Intelligence Stocks to Buy in 2025 was originally published by The Motley Fool.
