Investors do not immediately think of dividends when they research tech stocks. Indeed, technology companies are largely associated with having high growth potential, and growth stocks generally don’t offer dividends. Some do, but the payouts are often too small to justify as a reason for buying shares.

Tech corporations which have the potential to significantly increase their cash payouts over time make for valuable investment prospects, even if they do not currently offer an attractive yield. They should be in demand because they have strong potential in giving current shareholders (or shareholders who buy soon) a higher dividend yield than they currently receive.

Here are three tech stocks which have the ability to significantly increase the cash payouts they provide to investors.  Each of them is capable of generating a high level of cash flows, and this is the key reason for why they are able to support higher dividend payments to shareholders.

Applied Materials Inc - (AMAT - Analyst Report)

Applied Materials develops and manufactures semiconductor wafer fabrication equipment and related parts for the global semiconductor industry. Their customers include various manufacturers within the semiconductor space because they are a leader in providing materials engineering solutions for new chips and advanced display. AMAT has a market cap of $27.39 billion. 

This year, Applied Materials’ earnings and sales are projected to grow by 29% and 7.6% respectively. The company is pretty liquid with a current ratio of 2.58, and it also has a capital structure which isn’t too leveraged.Since 2013, AMAT has seen significant sales growth, and this has helped in providing higher gross margin levels for the corporation.

Applied Materials doles out a 1.59% dividend for shareholders, and while this is not very impressive, AMAT’s cash flows definitely are, and this will drive further dividend growth over time for the company. Since 2013, net income has been trending upwards, and this has been a key factor for why the company’s free cash flows have been so impressive in recent history. 

Applied Materials has also been using cash to buy back billions of dollars worth of shares, and this suggests that the corporation is betting on its own share price performance. Buying this stock for the long run seems to be a wise bet, but short term performance also appears to favor AMAT since it holds a Zacks Rank #1 (Strong Buy).

Cisco Systems Inc - (CSCO - Analyst Report)

Cisco designs and manufactures networking equipment which it sells to all kinds of companies around the world. The technology company provides products and services to retail, financial, and industrial companies. With its networking and IT solutions, Cisco seeks to transform business as we know it. The company is a Zacks Rank #2 (Buy) and it has a market capitalization of $148.02 billion. 

CSCO currently has a dividend yield of 3.53%, and growth metrics suggest that this company has room to boost its cash payouts to shareholders. Cisco’s earnings are forecasted to grow by 7.04% this year.It also boasts strong profits, and it has a trailing twelve month net margin of 20.72%. Many other peers within its industry are not as profitable, so Cisco stands out as a superior member within the computer networking industry. 

Each year, Cisco consistently posts a high level of sales, and its gross profit margins are very high at about 60%. The corporation has also posted a high level of free cash flows over the years, and this suggests that CSCO can continue to increase its dividend payouts over time. Cisco has been investing heavily in recent history, and it has made close to a dozen acquisitions in 2015. The company has made many of these acquisitions so that it can give it more exposure to the cloud industry. This industry is growing at a very fast pace, so this looks like a great move for Cisco.

Apple Inc - (AAPL - Analyst Report)

Apple is a technology giant that has dominated the consumer electronics market.Its phones, tablets, watches, music services, computers, and other platforms have a strong presence in their respective markets. Apple keeps expanding into different industries, and it will be interesting to see what the company will try next. Apple is a Zacks Rank #4 (Sell), so it may be wise to wait until the company’s earnings outlook changes for the better before pulling the trigger on AAPL stock.

Apple has a market cap of $531 billion, and it trades at a forward PE of just 11.76. While the company has suffered because of its struggle to grow further, it may be selling for less than it is actually worth. AAPL has an “A” for value in our Style Scores. This year, the company’s sales are forecasted to shrink by 7%, and while this is not where we’d like to see Apple, it will still be extremely profitable.

Apple currently gives shareholders a 2.35% dividend, but it generates enough cash profit to pay investors much more. In 2015 alone, the company’s operating activities generated $81.26 billion dollars. While 2016 isn’t expected to yield as much with regards to operating profits, they are still expected to be churning out cash at a very high level. Since 2013, the company has paid dividends and distributions at a clip of about $11 billion per year. 

Apple’s free cash flows over these years suggest that it could easily afford to double the amount it pays to shareholders. One thing that should not be overlooked is the fact that Apple has spent over $100 billion since 2013 to repurchase its stock. Companies buy back shares when they believe their stock is undervalued, so it is promising to see Apple bet on itself in this regard. 

Bottom Line

The yields in this article were not outstanding by any means, but that is not what you should be looking for. If you’ve got your eyes on the prize, you will be seeking out tech stocks with high cash flows because they have the ability to increase their cash payouts over time. If you scoop up these three companies and hold onto them for the long run, you stand to receive a higher amount of cash relative to the price you paid per share. By doing this, you will lock in a high and consistent stream of income for your portfolio.