3 Top Tech Stocks for Long-Term Growth and Income

Artificial intelligence (AI) is fueling meaningful growth for Microsoft (NASDAQ: MSFT), Texas Instruments (NASDAQ: TXN), and Broadcom (NASDAQ: AVGO). Each is a leader in its respective software, semiconductor, and networking markets, and all three have excellent records of paying and growing dividends. That combination can reward patient shareholders with long-term capital appreciation and steadily rising income.

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Microsoft

Microsoft has raised its dividend for more than 20 consecutive years. With a quarterly payout of $0.91, the stock offers a forward yield of about 0.9% -- modest, but fully supported by earnings and recurring revenue from cloud and subscription software.

The business continues to see substantial growth. In the fiscal fourth quarter (ending in June), revenue rose 18% year over year, while adjusted earnings increased 23%. Demand for the Copilot AI assistant is a key driver, with paid enterprise seats now topping 30 million, up from over 20 million in the last quarter.

Azure remains one of Microsoft's most important growth engines. It's benefiting from sustained enterprise spending, with Azure and other cloud revenue up 43% year over year last quarter.

AI will lower barriers to launching new software, increasing competition. But Microsoft is still hard to dislodge from its position thanks to its widely used productivity suite, entrenched enterprise relationships, and huge data center footprint that supports cloud growth.

At 20 times forward fiscal 2027 earnings estimates, the stock looks reasonably valued. Buying after the recent dip could set investors up for strong long-term returns.

Texas Instruments

Texas Instruments has increased its dividend for 22 straight years. The company aims to return all free cash flow to shareholders through dividends and buybacks, reflecting the strength of its high-margin analog and embedded processing businesses. Its chips power a wide range of end markets, from automotive and industrial equipment to consumer electronics and data centers.

With a quarterly dividend of $1.42, its forward yield is roughly 2%. The payout ratio is elevated at about 78% of trailing free cash flow, but improving demand and a longer growth runway should support continued dividend increases.

In the second quarter, revenue climbed 23% year over year, led by demand from the industrial, automotive, and data center sectors. Data center revenue doubled versus the year-ago quarter, as customers use the company's chips for crucial functions like power management.

Because semiconductor sales are cyclical, the best opportunities often appear when the cycle is turning. After a recent slump, automotive and industrial markets are starting to recover -- an encouraging backdrop for a company with Texas Instruments' scale.

Its moat comes from manufacturing capacity and longevity. The company sells more than 80,000 products, many of which stay in customer designs for years. That long product life supports sticky relationships and reliable cash generation.

Looking ahead, data centers should be a major catalyst. Analysts expect earnings to grow at an annualized rate of 23%, which could support the stock's valuation and deliver attractive total returns on top of the above-average yield.

Broadcom

Broadcom has grown its dividend at an annualized rate of about 31% over the last 10 years. With a quarterly payout of $0.65, its forward yield is 0.69%. The dividend consumes about 36% of trailing free cash flow and 41% of earnings, leaving room for additional increases as the business continues to grow.

In the recent quarter, revenue rose 48% year over year, while AI semiconductor revenue surged 143%. Its AI accelerators, or XPUs, have become widely deployed for AI workloads at major players including Alphabet's Google, Anthropic, OpenAI, and Meta.

The company is also a key supplier of data center networking equipment, including Ethernet switches and optics, that allow for super-fast data connections. This now makes up 40% of its AI revenue.

Broadcom also benefits from high-margin infrastructure software, which supports free cash flow and dividend growth. Management expects software revenue to rise 31% year over year in the third quarter.

The biggest risk is a slowdown in data center spending, which would cool growth and likely pressure the stock. Still, Broadcom has secured substantial commitments from leading AI customers, suggesting demand has staying power. The company has delivered strong shareholder returns for many years and should continue to do so over the long term.

John Ballard has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Alphabet, Broadcom, Meta Platforms, Microsoft, and Texas Instruments. The Motley Fool has a disclosure policy.