3 Dow Dividend Stocks That Could Crush S&P 500 in 2024 (Part-2)

The company's AI business is booming this year. IBM's book of business for generative AI and the Watsonx data and AI platform nearly doubled from the third to the fourth quarters, according to its fourth-quarter report.

IBM stock has risen 18.3% since 2024, surpassing the S&P 500's 7.3%. IBM stock's performance last year was considerably better. IBM has climbed 54% in the past year, while the S&P 500 has risen 34%. IBM's strong expansion was rewarded by investors. IBM increased sales by 3% and adjusted EBITDA by 6% in 2024. It had $11.2 billion in free cash flow, its best since 2019.

With management expecting free cash flow to grow by 7% to $12 billion in 2024, IBM's history of strong free cash flow should reassure investors about its dividend sustainability.

Microsoft compensates shareholders in several ways. Microsoft's Daniel Foelber: Microsoft set intraday and closing records on March 14. For good reason. AI, particularly Microsoft Copilots, is driving the company's fast expansion. Software like Microsoft 365 and GitHub includes these tools. AI assistant tools for LinkedIn and Azure AI are available.

Simply said, Microsoft uses AI. Putting aside the jargon, Copilots are great ecosystem additions. Like any product upgrade, they should boost growth. They already are.

Microsoft has its greatest trailing 12-month operating margin in 20 years at 44.2%. Considering its size, the company is growing swiftly. Despite the difficulty of turning a ship that enormous, Microsoft's AI monetization is improving its performance.

Microsoft also pays the most dividends in the U.S. Despite a significant stock-based compensation program, it has increased payouts by 63% in five years and reduced its outstanding share count by nearly 3%.

Despite being a growth firm, Microsoft is raising its dividend faster than most reliable payers. The dividend is modest because the stock price has grown faster than the payout, which is positive for Microsoft shareholders. Microsoft should lead the market upward and exceed the Dow Jones Industrial Average.

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