The Best Dividend Stocks to Buy and Hold Forever

Dividend growth can be more valuable over the long term than going for a high yield up front. The steady increases can compound substantially over decades, turning a relatively low dividend yield today into a higher yield on the original cost basis.

Some of the best dividend growth stocks are in the technology sector. This is a great way to profit from the growth of artificial intelligence (AI) while building your retirement income base. Here are two tech stocks with excellent dividend records to buy and hold for the long term.

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Broadcom

AI is undergoing a massive investment boom, driving enormous demand for Broadcom (NASDAQ: AVGO), a leading supplier of AI training hardware for data centers.

This leading semiconductor business currently pays a forward yield of 0.77% based on an annual dividend of $2.60 per share (paid quarterly). Broadcom's dividend has grown at an annualized rate of 12% over the past five years. Assuming it maintains that growth, an investor would be earning a yield of 2.39% on cost in 10 years and 7.43% in 20 years. That's the power of compounding growth.

Broadcom should sustain strong dividend growth. It makes high-performance networking switches, customized AI accelerators, and infrastructure software solutions for data centers. Its AI-related product backlog is $73 billion. This is a very profitable business, generating $23 billion in trailing-12-month net income on $64 billion of revenue.

The company pays out roughly half of its annual earnings in dividends, leaving plenty of room to maintain and grow the dividend even if it experiences a year of weak demand during a recession. All told, this is an excellent AI stock that can also help you grow your passive income over the long term.

Microsoft

Microsoft (NASDAQ: MSFT) has generated robust profits and revenue from its software for decades. It began paying dividends to shareholders in 2004 and has increased the dividend by 10% annually in the last five years. The stock's forward yield (based on the current quarterly payment of $0.91 per share) is currently 0.90%.

Software stocks have sold off hard this year amid fears that advanced AI agents like Anthropic's Claude could disrupt established software providers. These risks are real, but Microsoft's leadership in AI technology should keep it in a solid competitive position. It recently introduced Agent 365 to help businesses safely extend their security, identify management, and governance for use with AI agents.

One of Microsoft's most important advantages is trust. Organizations are likely to stick with solutions offered by the software provider they have been using for years. Microsoft has over 450 million commercial seats in its flagship Microsoft 365 software suite. It reported a stellar 17% year-over-year increase in revenue last quarter, driven by strong demand for its core productivity software products and enterprise cloud services.

While the current yield is modest, Microsoft is only paying out 22% of its trailing earnings in dividends. Microsoft's growth in AI software should drive solid dividend growth for years to come.

John Ballard has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Microsoft. The Motley Fool recommends Broadcom. The Motley Fool has a disclosure policy.