What are we looking for?
Leaders in artificial intelligence (AI) with strong growth ahead, but also sustainable dividends.
Apple suffered an embarrassment last week when its AI-powered facial recognition feature failed to work during the iPhone X unveiling. That technical glitch aside, Apple and many tech leaders will undoubtedly boost sales with AI-powerful computers using big data to mimic human intelligence.
Starting with our list of Canadian and U.S. stocks, we singled out those firms that have successfully developed and commercialized AI. Focusing on the dividend payers among them, we then applied our TSI Dividend Sustainability Rating System. It awards points to a company based on seven key factors:
- One point for five years of continuous dividend payments – two points for more than five years;
- Two points if those payments have been raised in the past five years;
- One point for management’s public commitment to dividends;
- One point for operating in non-cyclical industries;
- One point for limited exposure to currency exchange rates and freedom from political interference;
- Two points for a strong balance sheet, including manageable debt and adequate cash;
- Two points for a long-term record of positive earnings and cash flow to cover dividend payments;
- One point if the company is a leader in its industry.
Publicly traded companies with 10 to 12 points have the highest sustainability rating, while those with seven to nine points are above average; four to six points, average; and one to three points, below average.
More about TSI Network
TSI Network is the online home of The Successful Investor Inc. – Pat McKeough's widely followed group of Canadian investment newsletters. They include our award-winning flagship newsletter, The Successful Investor, which covers TSX index stocks. The TSI Dividend Advisor is the newest addition. TSI Network is also affiliated with Successful Investor Wealth Management.
What we found
Our TSI Dividend Sustainability Rating System generated six cutting-edge AI stocks that already offer growing dividends. Microsoft, for example, is putting to use the biggest library of AI patents in the world. Cisco's voice-recognition AI works across all apps and devices; the tech company has also developed AI-protected network security. Intel's AI chips already power Google's self-driving cars; and IBM is leveraging the AI of its Watson supercomputer to develop more autonomous computers and other AI-supported products. Auto-parts leader Magna recently released its AI-powered self-driving platform. Symantec is a global pioneer in AI to ferret out potential cyberattacks from a maze of Internet traffic.
(Notable by its absence, dividend-paying Apple did not make the cut because of its high reliance on the iPhone for future growth and the lacklustre performance of highly touted new products such as the Apple Watch.)
All six of our top AI stocks appear in the accompanying table.
We advise investors to do additional research on any investments we identify here.
Scott Clayton, MBA, is senior analyst for TSI Network and associate editor of TSI Dividend Advisor.
Select artificial-intelligence stocks
|Ranking*||Company||Ticker||Dividend Sustainability Rating||Market Cap ($ Bil)**||Yield (%)||Points|
|2||Cisco Systems Inc.||CSCO-Q||Above Average||161.4||3.6||9|
|3||IBM Corp.||IBM-N||Above Average||136.0||4.1||8|
|4||Intel Corp.||INTC-Q||Above Average||174.2||2.9||8|
|5||Magna International Inc.||MG-T||Above Average||23.8||2.2||7|
Source: Dividend Advisor.
*Ranking is determined by TSI Dividend Sustainability Score. Where overall points are the same, analysts considered P/E, dividend yield and industry outlook to decide final placements. **Market cap is in native currency