Two Technology Giants Demonstrate the Long-Term Power of Dividend Growth

Investors searching for reliable sources of passive income often face a choice between stocks that offer high dividend yields today and those whose payouts grow steadily over time. Recent market data released on 23 February 2026 highlight two companies—Broadcom and Microsoft—that illustrate how consistent dividend growth within the technology sector can turn relatively modest current yields into substantial income streams in the decades ahead.

Steady Compounding Beats Immediate High Yield

Dividend strategies generally fall into two categories. The first targets stocks with elevated yields, delivering larger cash distributions in the short term but sometimes offering limited room for future raises. The second focuses on businesses with lower initial payouts but strong cash generation that supports regular increases. Financial research cited by the U.S. Securities and Exchange Commission underscores that the latter approach can produce superior total returns as reinvested dividends and rising per-share payments compound over time.

The rapid adoption of artificial intelligence (AI) has broadened the opportunity set for dividend growth investors, drawing attention to established technology leaders with expanding profit pools. Broadcom and Microsoft stand out for combining exposure to AI with disciplined capital-return policies that have produced years of consecutive dividend hikes.

Broadcom: Hardware Backbone of the AI Expansion

Broadcom (NASDAQ: AVGO) sits at the center of a multiyear investment wave in AI infrastructure. The semiconductor manufacturer supplies high-performance networking switches, custom AI accelerators, and supporting software that power data centers worldwide. Demand for these components is reflected in a reported AI-related product backlog of $73 billion.

The scale of that backlog translates into robust profitability. Over the last 12 months, Broadcom generated $23 billion in net income on $64 billion in revenue, a margin profile that enables consistent shareholder returns. The company distributes roughly half of its earnings through dividends, leaving a sizable buffer to maintain payments even during cyclical downturns.

Broadcom’s current forward dividend yield stands at 0.77%, based on an annual payout of $2.60 per share disbursed in quarterly installments. While this yield trails the broader market average, management has lifted the dividend at a 12% compound annual rate over the past five years. If that pace continues, an investor buying today would earn an estimated yield on original cost of 2.39% after 10 years and 7.43% after 20 years. Those projections illustrate how systematic increases can eventually eclipse higher-yielding alternatives that lack growth.

Broadcom’s disciplined payout ratio and expanding addressable market suggest further dividend hikes remain likely. By continuing to supply critical hardware for data centers—a segment expected to see sustained capital spending as AI workloads accelerate—the company is positioned to translate revenue growth into rising cash distributions for shareholders.

Microsoft: Software Leader Extends Its AI Footprint

Microsoft (NASDAQ: MSFT) complements Broadcom’s hardware exposure with a software-focused angle on AI adoption. The company introduced regular dividends in 2004 and has since maintained a consistent upward trajectory, increasing the payout by an average of 10% annually during the last five years.

Based on the present quarterly payment of $0.91 per share, Microsoft’s forward dividend yield is 0.90%. Although software stocks have endured sharp price swings in 2026—prompted by concerns that advanced AI agents such as Anthropic’s Claude could disrupt legacy applications—Microsoft’s investment in proprietary AI models and cloud infrastructure has reinforced its competitive standing.

A recent example is Agent 365, a suite of tools designed to help enterprises integrate AI capabilities while adhering to established security, identity management, and governance protocols. By embedding AI functionality directly into its widely used productivity and cloud platforms, Microsoft aims to deepen customer reliance and open additional revenue streams that can support future dividend growth.

Imagem: Internet

The company’s expansive balance sheet and recurring subscription income also play key roles. Microsoft consistently produces substantial free cash flow, giving management flexibility to fund research, pursue acquisitions, and return capital through both dividends and share repurchases. That combination has historically underpinned annual payout increases, and the same financial characteristics are expected to persist as AI adoption accelerates.

Comparing the Two Dividend Profiles

While Broadcom and Microsoft operate in different segments of the technology stack, their dividend strategies share several features:

• Disciplined payout ratios: Both firms retain sufficient earnings to navigate economic slowdowns without jeopardizing shareholder distributions.
• Exposure to secular growth trends: Each company offers investors a way to participate in the long-term expansion of AI, a market projected by industry analysts to grow at double-digit rates through the next decade.
• Demonstrated commitment to dividend increases: Five-year growth rates of 12% and 10% for Broadcom and Microsoft, respectively, underscore management’s focus on compounding shareholder returns.

The combination of modest current yields and strong historical growth rates suggests that patient investors could see their effective income rise substantially over time. Importantly, neither company relies exclusively on dividend distributions to reward shareholders; ongoing share buybacks provide an additional mechanism for returning excess cash, potentially enhancing total returns.

Long-Term Outlook

Choosing between high initial income and dividend growth often depends on an investor’s time horizon. For those with multi-decade objectives, the ability of companies like Broadcom and Microsoft to convert rising earnings into larger per-share payments can prove more valuable than locking in a higher yield with limited upside.

Both enterprises benefit from entrenched competitive advantages—Broadcom in specialized semiconductor design and Microsoft in enterprise software ecosystems—that position them to capture a growing share of AI-related spending. Their consistent track records of dividend expansion, supported by solid balance sheets and diversified revenue, provide tangible evidence that these payouts can endure and grow despite market volatility.

As AI continues to reshape global technology infrastructure, Broadcom and Microsoft offer investors a dual opportunity: participate in one of the most significant secular growth themes of the era while building a rising stream of passive income designed to hold up well into retirement.

Crédito da imagem: Getty Images