3 Dividend-Paying Tech Stocks to Buy in May

Technology stocks get a reputation as high-flying, high-risk bold investments, but that’s not always true. Many technology companies with reliable, established business models pump out cash that is passed on to shareholders as dividends.

Long-term dividend investors should diversify their portfolios to reflect as many industries as possible, including sprinkling in some tech names. But don’t worry if you’re not sure where to look. Here are three quality dividend-paying tech stocks trading at attractive valuations today.

1. Automatic Data Processing

People are often a company’s greatest asset, but managing employees can be challenging. Automatic data processing (ADP 0.69%) offers a range of cloud-based solutions for managing human talent. ADP helps companies handle payroll, taxes, and benefits—just about everything that involves the people who work in a company.

ADP has been around for a long time; the company paid and increased its dividend for 48 consecutive years, making the stock a soon-to-be Dividend King. And dividends should continue to rise for years — the payout consumes just over half of ADP’s cash earnings, and gets a low-to-mid single-digit boost each year.

ADP Dividend Yield data by YCharts

The stock trades at a price-to-earnings ratio (P/E) of 27, a notch below its decade average of 29. Analysts believe ADP will grow earnings by an average of 12% annually over the next three to five years . The company’s long track record of stable performance and double-digit growth prospects likely make ADP an excellent trade at a fair price.

2. Verizon

Are you looking for something with a higher dividend yield? American telecom giant Verizon Communications (VZ -0.14%) has you covered. Verizon operates wireless networks and Internet services, primarily in the United States. Verizon faces little threat from outside competitors, as a few operators dominate a business that requires billions of dollars in ongoing investments to upgrade and maintain its network.

Verizon’s business generates a lot of operating profits, which allows Verizon to pay a large dividend despite continuously investing in its business. The company has increased its payout for 19 years, climbing the ranks of dividend growth. The big headline is that shareholders can score a 7% dividend yield at today’s share price, although you can see below that it doesn’t offer much growth to go with it.

VZ Dividend yield data by YCharts

Verizon’s business isn’t growing much; Analysts believe that earnings-per-share (EPS) will increase by an average of only 4% annually for the next several years. That explains why shares trade at a P/E of just 8. That’s enough growth to give investors roughly 10% annual investment returns once you add the juicy dividend, a solid draw for income-oriented investors.

3. Corning

Technology goes beyond software, including hardware and materials that sometimes need to be on the cutting edge of science. Corning (GLW 1.52%) sells various specialized glass and material products, such as displays for smartphones and optical fiber for communication. The end markets span the economy from automotive to aerospace and defense.

Corning is a rising dividend stock with 13 consecutive dividend increases to its name. You will see that the dividend payout ratio is currently over 100%. The company has had a soft year due to weaker demand in some end markets. However, management expects cash earnings to turn positive in Q2, and there is $1.1 billion in cash on the books. Investors should not panic and assume that a cut is coming, but it is something to keep an eye on.

GLW Dividend Yield data by YCharts

The company’s short-term headwinds have pushed the stock to a P/E of 15 against 2023 earnings estimates, which is right on par with its average over the past decade. A stock with a dividend yield close to 4% and EPS expected to grow by 7% annually offers investors a solid bet on double-digit total returns, with additional potential if Corning can improve its performance.