Three Stocks that Generate Dividends and Utilize Artificial Intelligence by 2025 to Consider Purchasing
Artificial intelligence has been a bustling sector in 2024, and companies like Nvidia have benefited significantly. Nvidia's stock skyrocketed by nearly 180% in the past year, ending at Dec. 31.
The AI sector isn't losing momentum anytime soon. Analysts predict that the industry will grow exponentially, rising from $184 billion in 2024 to more than $826 billion by 2030.
One effective method to gain from the AI boom is by investing in companies that not only work in AI but also provide lucrative, reliable dividends. However, not every dividend-paying AI stock is created equal. For instance, while Nvidia provides dividends, its yield is quite low, at 0.03%, as of now.
If you're looking for AI companies that pay substantial dividends, consider International Business Machines (IBM), Cisco Systems (CSCO), and Verizon Communications (VZ). Let's delve deeper into each.
IBM's attractive features
Investing in IBM stock provides numerous reasons to consider. Shareholders enjoy an excellent dividend yield of 3%, and these payouts are as dependable as you can hope for. Since 1916, IBM has consistently paid quarterly dividends, and it has even increased these payments for the past 29 years.
IBM wisely shifted its focus to cloud computing and AI by 2020. After the demand for AI surged in 2023, IBM experienced revenue growth thanks to its AI offerings.
IBM's third-quarter sales derived from generative AI rose by over $1 billion compared to the second quarter. This stellar performance echoes the strong demand for its AI offerings.
IBM's future looks promising as well. The company is working on quantum computing, utilizing subatomic particles to execute calculations at unprecedented speeds on the world's most powerful supercomputers. If IBM can effectively scale its quantum capabilities, it could develop advanced AI beyond what's available today.
The argument for Cisco
Cisco built its reputation in computer networking, a discipline even more vital in the AI era. AI requires computational power from numerous connected computers to crunch the massive amounts of data required for AI to function. To deliver this AI to customers, robust, dependable, and secure internet networks are essential.
Cisco excels in these areas, and its 20% year-over-year increase in product orders in Q1 2025 (Oct. 26 end) is a testament to this. This strong start to its fiscal year led Cisco to predict its 2025 revenue to fall between $55.3 billion and $56.3 billion, surpassing 2024's $53.8 billion.
CEO Chuck Robbins believes that AI will fuel Cisco's sales growth. He notes that businesses are investing in IT infrastructure to cater to AI demands. As a result, Cisco is integrating its Cisco Silicon One platform into its products, a custom semiconductor chip designed to maximize speed and efficiency for AI.
Moreover, the stock offers a dividend with a yield of almost 3%. Cisco has consistently increased its dividend for over a decade.
Verizon's AI contributions
Verizon's involvement in AI revolves around edge computing, which entails bringing AI to your devices, such as laptops, mobile phones, or internet-enabled vehicles, which are situated on the periphery of a computer network.
To implement edge computing, a wireless network capable of managing large data loads swiftly and securely is required. Verizon's 5G network fits this description. Verizon partnered specifically with Nvidia to allow AI use on its network.
While this capability will be available in 2025, Verizon's wireless service is already performing well. In Q3, its wireless service business experienced sales growth of 3% compared to the previous year, reaching $19.8 billion, making up the bulk of Verizon's Q3 revenue of $33.3 billion.
Verizon is a solid dividend stock as well, relying on substantial free cash flow (FCF) to fund its dividends due to the widespread use of cell phones. Through the first three quarters of 2024, the company produced $14.5 billion in FCF, demonstrating its FCF consistency and surpassing 2023's $14.6 billion.
Due to its strong FCF, Verizon has raised its dividend payments consistently for 18 consecutive years. Moreover, its dividend yield is almost 7% as of now.
As the AI market's growth propels IBM, Cisco, and Verizon, combined with their high dividend yields, these companies provide a great opportunity to generate a return on your AI investment while earning passive income as the AI sector expands over time.
Investing in the AI sector can also involve considering companies that offer substantial dividends, such as IBM, Cisco, and Verizon. Unlike Nvidia, whose yield is relatively low, IBM offers an attractive dividend yield of 3%, making it a viable option for investors seeking passive income.
In fact, IBM has consistently paid dividends since 1916 and has even increased these payments for the past 29 years, making it a reliable choice in the AI sector. With its focus on cloud computing and AI, IBM's third-quarter sales derived from generative AI, expanding at over $1 billion compared to the second quarter, show its strong performance and growing demand for its AI offerings.
