3 Dividend Paying AI Stocks to Buy Now

Growing demand for all things artificial intelligence (AI) is expected to add value to the economy in the trillions, in part from the productivity gains it should create. Early investors in the companies that facilitated PC adoption 30 years ago, such as Microsoft and Intelearned outstanding profits. AI offers similar return potential for investors who pick the right stocks.

While AI growth stocks are obvious options to consider, investing in profitable AI companies that also pay dividends should also be considered, especially for investors with a long-term mindset.

Here are three AI dividend stocks that show real potential to earn excellent returns for long-term investors.

1. Nvidia

Nvidia (NVDA -0.03%) benefit from a massive shift in data centers to accelerated computing to handle AI training and inference. Last quarter, the company’s revenue more than doubled from the year-ago quarter, driven by increased demand for its graphics processing units (GPUs), which are needed to train AI models.

Nvidia should see stronger growth next year. It is preparing to launch the next generation of the Blackwell computing platform, which takes processing power to a new level. Next-generation AI models will require 10 to 20 times more computing power, and Nvidia is poised to provide the hardware for the $1 trillion worth of data centers that will be needed to make it happen.

Many investors may not realize that Nvidia has paid a regular dividend for over 10 years. They also may not know that they have increased their quarterly payment by 150% this year. The quarterly dividend of $0.01 per share is admittedly not much, but it highlights the company’s incredible growth in profitability.

Nvidia generated $46 billion in free cash flow over the past 12 months, four times year-over-year. The company’s growth prospects and profitability should lead to substantial payout increases over the next 10 years, and that’s in addition to additional share price appreciation potential for this stock.

2. Dell Technologies

Dell Technologies (DELL 1.92%) The recent drop in the stock price is a good opportunity to get the stock at an above-average return, given the prospects for a recovery in the PC market and demand for AI servers.

Dell’s two main sources of revenue are customer solutions, including PC sales, and infrastructure solutions, which include the fast-growing AI server business. The PC market has struggled this year due to macroeconomic headwinds, but management is optimistic about a possible near-term PC recovery as Microsoft’s Windows 10 reaches the end of its life and forces users to upgrade.

However, only the opportunities in AI could drive the stock higher. Dell has a major lead in the AI ​​server market, which is expected to grow tenfold over the next decade, according to Statista. Dell combines state-of-the-art server technology with additional services, cementing it as a leading supplier. The company posted 38% year-over-year growth in its infrastructure solutions group last quarter.

Analysts expect Dell to grow revenue by 12% on an annual basis over the next few years. This should lead to growing dividends. The company raised its quarterly dividend by 20% earlier this year and currently pays $0.445 per share.

The current dividend payout brings the forward yield to 1.68% — higher than S&P 500 average of 1.32%. The above-average yield and modest price-to-earnings (P/E) ratio of 13 suggest the stock is undervalued and an excellent buy ahead of more growth in the server market.

3. Meta Platforms

The owner of Facebook and Instagram Meta platforms (META -0.19%) benefits from a highly profitable digital advertising business that is getting a major boost from AI technology. The social media leader initiated its first quarterly dividend in Q1, which speaks volumes for Meta’s long-term prospects and management’s confidence in the returns it’s seeing on its AI investments.

A debate is beginning to develop over whether enterprises are getting a positive return on the billions spent on AI infrastructure. Meta can answer this question with a thumbs up. It has successfully integrated AI on Facebook and Instagram, which improves content recommendations and benefits the user experience. This had a positive impact on the growth of ad spend and revenue.

Meta reported 22% year-over-year revenue growth in Q2 — double the growth rate in the year-ago quarter. Meta has been a major player in AI with the release of its Llama generation of large language models. It was able to build this technology while paying a quarterly dividend to shareholders, which points to a prosperous future for the company in the AI ​​era.

Meta’s current quarterly payout is $0.50 per share, bringing its forward yield to 0.4%. Investors should expect the company’s double-digit growth to grow its quarterly dividend by double-digit percentage rates in the coming years.

Analysts expect Meta’s earnings to grow by 18% per year in the coming years, so with an average forward P/E of 23, investors should expect excellent returns along with a growing dividend.