Dividends Meet Chips: Top 3 Semiconductor Stocks for Growth

Key Points

• Dividend income often isn't the easiest thing to come by in the semiconductor industry.
• However, some stocks in the space do offer a mixture of both income and potential growth.
• These three stocks recently increased their dividend payments.

In an industry often characterized by high growth rather than dividend income, finding semiconductor companies that offer both can be particularly appealing. Below are three semiconductor stocks that provide investors with dividend payouts and have recently announced notable increases. I’ll review each firm's dividend details and provide insights into their businesses.

All figures are as of January 29, 2025.

KLA: Equipment Giant on Track for 15th Consecutive Annual Dividend Increase

KLA NASDAQ: KLAC doesn’t manufacture or design semiconductors but sells the highly specialized equipment necessary for chip production. Similar to ASML NASDAQ: ASML, which specializes in lithography equipment, KLA focuses on process diagnostic control (PDC) and metrology—two essential elements in modern semiconductor manufacturing.

PDC is used to detect and correct defects throughout the manufacturing process, helping to improve chip yield per silicon wafer.

Metrology, on the other hand, involves measuring both the physical and electrical properties of wafers to ensure they meet strict design specifications. Tools like electron microscopes play a critical role in this process.

On November 7, 2024, KLA announced a 17% increase in its quarterly dividend to $1.70 per share, up from $1.45 previously. This marks the company's 15th consecutive annual dividend increase.

At the current stock price of $709.52, the dividend yield stands at approximately 0.96%.

TSM: Industry Powerhouse Boosts Dividend by Nearly 10%

Taiwan Semiconductor Manufacturing NYSE: TSM is one of KLA’s largest customers, as evidenced by KLA’s disclosure in its Form 10-K. Many investors regard TSMC as the second most recognized semiconductor company in the world, just behind NVIDIA NASDAQ: NVDA.

Unlike NVIDIA, which focuses on chip design, TSMC specializes in chip manufacturing. The company holds a near-monopoly on the production of cutting-edge semiconductors, which are crucial for AI and data center applications.

This has allowed TSMC to ride the AI boom, significantly benefiting from rising demand in 2024.

TSMC has rewarded investors with a solid dividend increase, raising its quarterly payout from $0.49 per share to $0.55 per share, an increase of approximately 13%. At the current stock price of $201.31, this results in a 1.09% dividend yield.

Over the course of 2024, TSM stock has delivered an 82% total return.

Power Integrations: Household Electronics Chip Stock Bumps Up Its Dividend

Power Integrations NASDAQ: POWI is much smaller than the other two semiconductor giants on this list, with a market cap of around $3.5 billion. The company specializes in chips used for high-voltage power conversion, making them critical components in everyday electronics.

The bulk of Power Integrations’ revenue—68% in 2023—came from chips used in consumer electronics, such as power adapters and household devices.

However, 32% of its revenue came from industrial applications, including electric vehicles, renewable energy systems, and industrial automation.

In November 2024, Power Integrations announced a 5% increase in its quarterly dividend to $0.21 per share. With a stock price of $59.03, this brings the company’s dividend yield to 1.42%.

While it has consistently raised its dividend since 2008, the stock has struggled in 2024 due to its lack of exposure to the AI and data center boom, resulting in a -21% total return for the year.