Turbocharge Your Portfolio With These Two Technology Stocks

Looking to boost your portfolio’s performance but don't know what to look for? Did you know that in the past 10 and 20 years, the tech sector typically delivered higher returns than the S&P 500? For example. YTD, the Nasdaq Composite is up 13.48% vs. the S&P 500’s 6.67%.

Not only that, but many tech companies are also now paying dividends, with some having significant dividend growth potential. Also, the last 12 months have given investors attractive valuations, and despite their strong historical performance as many tech stocks still trade at relatively attractive valuations.

Technology is one of the most exciting areas of the stock market, known for its rapid growth and propensity to create rapid and life-changing wealth for early investors. Now, let's look at 2 Tech stocks with exciting potential in the current landscape.

IBM (IBM)

International Business Machines Corporation (IBM) is a technology company that provides hybrid cloud and artificial intelligence (AI) solutions. It offers integrated solutions and products that use data and information technology (IT) in industries and business processes. Its segments include Software, Consulting, Infrastructure, and Financing.

• Software - Consists of two business areas: Hybrid Platform & Solutions, which includes software to help clients operate, manage, and optimize their IT resources and business processes within the hybrid, multi-cloud environments, and Transaction Processing, which includes software that supports clients’ mission-critical, on-premises workloads in various sectors.
• Consulting - engages in business transformation, technology consulting, and application operations.
• Infrastructure - engages in hybrid infrastructure and infrastructure support.
• Financing - engages in client financing and commercial financing business.

 Recent Financial and Key Moves

IBM’s revenue last year for the most recent annual report Dec. 31, 2022, was $60.53 billion, up 5.5% from last year’s $57.35 billion.

IBM’s annual dividend yield based on its last trading price of $135.02 is 4.89%. Their latest dividend was announced on January 31, 2023, is for $1.65. IBM has been paying higher dividends for the last 5 years (higher than its peer median yield of 2.9%).

The company has 2 recent significant developments:

• IBM has introduced Vela, its first AI-optimized, cloud-native supercomputer, housed within IBM Cloud. - Vela is a system optimized for large-scale AI workloads. It is designed to be more flexible and cost-effective than traditional supercomputers, by leveraging the benefits of the cloud. Vela is currently only available within the IBM Research community, but IBM plans to deploy the infrastructure into any IBM Cloud data center globally.
   
• IBM acquires StepZen to help enterprises get more business value from their data and APIs. StepZen will give developers an easier way to build GraphQL APIs which is a new standard for APIs that is quickly gaining traction in the industry. The company takes a declarative programming approach, which results in smaller, more intuitive code and faster time to value. This acquisition is expected to help IBM deliver data, AI, and automation solutions that businesses need in the hybrid cloud era.

Given that IBM is a household name and continues plans for innovation and growth alongside its long history in the market, IBM is certainly one of the stocks any dividend investor would like to have in their portfolio with a “futureproof” attribute due to its exposure in the AI space.

ADP (ADP)

Automatic Data Processing, Inc. (ADP) is a global leader in providing cloud-based human capital management (HCM) solutions that unite HR, payroll, talent, time, tax, and benefits administration. The company was founded in 1949 by two brothers, Henry, and Joe Taub. It is currently headquartered in Roseland, New Jersey, the United States.

ADP offers software and services in more than 140 countries and has over 1 million clients. It also has over 60,000 active employees. The company’s operations are divided into two segments:

ADP’s two business segments are:

• Employer Services and Professional Employer Organization Services - offers a comprehensive suite of HRO and technology-based HCM solutions. This segment has well-known software such as ADP Vantage HCM, ADP Enterprise HR, ADP SmartCompliance, etc., to name a few.
• The Professional Employer Organization Services - provides small and medium-sized businesses with employment administration outsourcing solutions. Some of the most popular programs in this segment are: 
  • RUN- a web-based software for managing a small business payroll and HR.
  • ADP TotalSource- a benefits and compliance oversight management technology.
  • ADP Mobile Solutions- a mobile application that allows users seamless access to payroll, benefits, and more.

Recently, Automatic Data Processing Inc. has made changes in its administrative structure. Maria Black succeeds Carlos Rodriguez as CEO as of January 1, 2023, and Rodrigues continues as executive chairman of the board.

Recent Financial and Key Moves

ADP’s revenue in its latest quarterly report is $4.391 billion, which is up 9.1% YoY from last year’s $4.025 billion. ADP’s dividend yield based on its last trading price of $228.70 is 2.19%. 

Since 1975, ADP has continuously increased its dividends for 48 consecutive years. The company is also listed in the S&P 500 index. This continuous progress has earned the company a spot on the curated Dividend Aristocrats list. 

The Vanguard Group, Inc. is ADP's top shareholder, with a stake of 9.24% in the company. The second and third largest shareholders are Blackrock Inc. and State Street Corporation, respectively.

Final Thoughts

Adding technology stocks to your portfolio can offer a high growth potential. That said, it's important to select stocks that have strong financials and growing bottom lines - making them more attractive as long-term investments. Both ADP and IBM are well-known brands in their respective industry. The only question should be, “Should I add these to my portfolio?”

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