Investors seeking a blend of solid yields and potential capital appreciation may find promising opportunities in the dividend stocks of Silicon Motion Technology and Microsoft, both of which are often overlooked in today’s market.
Silicon Motion Technology, a Hong Kong-based firm specializing in NAND flash controllers for solid-state storage devices, is capitalizing on the booming demand from various sectors, notably artificial intelligence (AI). These controllers are essential for applications across smartphones, Internet of Things (IoT) devices, and larger AI data center infrastructures. In a notable shift, the company reported a 46% year-over-year revenue surge in the fourth quarter, fueled by intense investments from major tech firms, which are expected to spend approximately $650 billion on AI this year.
CEO Wallace Kou has expressed optimism, anticipating a “significantly stronger-than-seasonal start” for the first quarter. This is a drastic uptick compared to the previous year, where the company only registered 10% growth. Over the past year, Silicon Motion’s stock has impressively increased by 130%, although its dividend yield stands at a modest 1.56%. The company boasts a solid cash position of $277.1 million, with only $16.7 million allocated to dividends in the last quarter. This financial health enables it to sustain and potentially grow dividends, aligning the company’s long-term growth strategy with shareholder returns.
On the other hand, Microsoft, a dominant force in the technology sector, is experiencing a sharp correction, which has inadvertently elevated its dividend yield to approximately 0.91%. This yield, while still moderate, reflects the impact of a 15% year-to-date share price decline. Notably, despite the dip, Microsoft has demonstrated solid growth metrics, including a 17% revenue increase year-over-year for Q2 of fiscal year 2026, largely driven by a remarkable 39% surge in Azure and cloud services.
Investors might express concern over Microsoft’s increasing AI expenditures; however, these investments are crucial for sustaining its growth trajectory. The company reported a striking 60% year-over-year increase in net income for the same quarter, validating its strategic focus on AI.
In conclusion, both Silicon Motion Technology and Microsoft are positioned well for investors looking for dividend growth along with compelling long-term growth narratives. While Silicon Motion benefits from the rising demand in the AI space, Microsoft is leveraging its established market position to navigate short-term challenges.
