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What are we looking for?

Sustainable dividend payers with underlying business strength and already capitalizing on artificial intelligence (AI).

The screen

This week’s firing and rehiring of OpenAI chief executive Sam Altman is further stirring investor interest in the arms race emerging between AI industry competitors. That aside, we see several players as being well-positioned to monetize AI ‘s continuing growth.

San Francisco-based OpenAI is a private research company whose backers include Microsoft. Its ChatGPT chatbot interacts with people in a conversational way and provides human-like responses based on data culled from the Internet. OpenAI is by no means alone in this emerging field.

Many of its competitors may evolve into profitable companies, but we think the best way for most investors to gain from AI today is through companies already applying AI profitably. At the same time, the best of those players should have a solid base of business to power their returns outside of the hypercompetitive AI sphere.

Our search started with a list of U.S. and Canadian stocks with significant exposure to AI – that’s on top of the financial strength to pay sustainable dividends. We then applied our TSI Dividend Sustainability Rating System, which awards points to a stock based on key factors:

  • One point for five years of continuous dividend payments, and two points for more than five;
  • Two points if it has raised the payment in the past five years;
  • One point for management’s commitment to dividends;
  • One point for operating in non-cyclical industries;
  • One point for limited exposure to foreign currency 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 dividends;
  • One point if the company is an industry leader.

Companies with 10 to 12 points have the most secure dividends, or the highest sustainability. Those with seven to nine points have above-average sustainability; average sustainability, four to six points; and below-average sustainability, one to three points.

More about TSI Network

TSI Network is the online home of The Successful Investor Inc. – the group of widely followed Canadian investment newsletters by editor and publisher Pat McKeough. They include our award-winning flagship newsletter, The Successful Investor, and the TSI Dividend Advisor. TSI Network is also affiliated with Successful Investor Wealth Management.

What we found

Attractive dividend payers capitalizing on AI

Ranking*CompanyTickerDiv. Sustain. RatingPointsDiv. Yld. (%)Mkt. Cap. (US$ Bil.)1Y Ttl. Rtn. (%) Recent Price (US$)
1Microsoft Corp.MSFT-QHighest100.82,772.854.1377.85
2IBM Corp.IBM-NAbove Average84.3140.54.1155.13
3Accenture PLCACN-NAbove Average81.6207.413.8333.13
4Intel Corp.INTC-QAbove Average81.1184.046.543.67
5Nvidia Corp.NVDA-QAbove Average80.031,233.6203.7487.16
6Qualcomm Inc.QCOM-QAbove Average72.5141.83.4127.50
7Teradyne Inc.TER-QAbove Average70.514.0-0.592.44

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.

Our TSI Dividend Sustainability Rating System generated seven stocks: Microsoft Corp. MSFT-Q, based in Redmond, Wash., is the world’s largest software provider. It’s using its high R&D spending to add AI to many of its products and services, and it was an early investor in ChatGPT.

Nvidia Corp. NVDA-Q, headquartered in Santa Clara, Calif., is a leader in graphics and multimedia chips, and also in the computer chips needed to make AI applications possible.

Intel Corp. INTC-Q, also based in Santa Clara, is one of the world’s biggest makers of chips for PCs and servers, and it has used timely acquisitions to accelerate the launch of its AI chips.

Similarly, San Diego, Calif.-based Qualcomm Inc. QCOM-Q, which focuses on chips and software for wireless devices, is rapidly adding AI capabilities to those offerings.

Boston-based Teradyne Inc. TER-Q is a leading global supplier of automated test equipment used by computer chip makers. Complex AI chip designs bring new requirements for enhanced testing – and Teradyne is meeting those demands. (Note that like Nvidia, Teradyne’s dividend yield is low. But that reflects a focus on reinvesting cash flow in research to stay ahead of the competition.)

Armonk, N.Y.-based IBM Corp. IBM-N is one of the world’s largest computer companies, with operations in over 175 countries. It’s at the forefront of AI research and applications – including its own AI-powered chatbot, watsonx Assistant.

And finally, Accenture PLC ACN-N is an Irish-American professional services company based in Dublin, specializing in IT services and consulting. It’s gaining prominence by adding AI deployment to its consulting services, with a focus on ethical and responsible deployment.

Scott Clayton, MBA, is senior analyst for TSI Network and associate editor of TSI Dividend Advisor.

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Tickers mentioned in this story

Study and track financial data on any traded entity: click to open the full quote page. Data updated as of 04/03/24 4:00pm EST.

SymbolName% changeLast
MSFT-Q
Microsoft Corp
-0.14%414.92
IBM-N
International Business Machines
+2.58%193.06
ACN-N
Accenture Plc
+0.71%383.71
INTC-Q
Intel Corp
+4.08%45.61
NVDA-Q
Nvidia Corp
+3.6%852.37
QCOM-Q
Qualcomm Inc
+2.13%166.56
TER-Q
Teradyne Inc
-0.05%105.83

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