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The AI trade has been anything but smooth in 2026.<\/p>\n
After a strong run, investor sentiment has shifted in recent months. Many artificial intelligence stocks have sold off sharply, and investor anxiety has risen alongside them.\u00a0<\/p>\n
But not every analyst is running for the exits.<\/p>\n
Morningstar sees the pullback as a chance to buy well-capitalized AI names at a discount. Two dividend stocks, in particular, are catching their eye: Microsoft and Broadcom.<\/p>\n
Both carry wide economic moat ratings from Morningstar, indicating durable competitive advantages.\u00a0<\/p>\n
Both are profitable, growing, and committed to paying shareholders. <\/p>\n
And right now, both dividend stocks are sitting at prices that Morningstar believes significantly understate their true worth.<\/p>\n
Microsoft: A dividend stock built for the AI era<\/p>\n
Microsoft (MSFT) is a Dow 30 stock that pays a quarterly dividend of $0.91 per share, or $3.64 annually, with a current dividend yield of around 0.98%.\u00a0<\/p>\n
The tech stock has raised its dividend for 21 consecutive years, making it one of the most reliable income payers in the technology sector.<\/p>\n
Key dividend metrics for MSFT stock:Dividend yield: About 0.98%Annual dividend per share: $3.64Payout ratio: Approximately 40% of FCFDividend growth (1 year): About 10%Consecutive years of dividend growth: 21Payout frequency: Quarterly<\/p>\n
Microsoft is barely tapping its FCF to fund its dividend, which means there’s plenty of runway for future increases.<\/p>\n
More on dividend stocks:Energy Transfer stands out as high-yield dividend stockIs Realty Income the best monthly dividend stock to buy nowVerizon remains a top dividend stock for passive income<\/p>\n
Morningstar assigns the stock its highest five-star rating and a $600 fair value estimate, implying the stock is roughly 62% undervalued at current prices.\u00a0<\/p>\n
It also holds a “wide moat” designation and a “medium” uncertainty rating, a combination that signals long-term competitive strength with manageable risk.<\/p>\n
The bull case is straightforward. Azure, Microsoft’s cloud platform, is already an approximately $75 billion businessgrowing at around 30% annually.\u00a0<\/p>\n
Its investment in OpenAI has also positioned it at the center of the AI arms race.<\/p>\n
At the Morgan Stanley Technology, Media & Telecom Conference last month, Microsoft Chairman and CEO Satya Nadella made the case for what he called the “network effects of intelligence”: a vision where AI compounds the value of everything Microsoft has already built in its productivity and cloud businesses.<\/p>\n
“The next office, which is bigger than all of the offices that came before, may be headless,” Nadella said, pointing to AI-powered agents that work on behalf of users without a traditional interface.<\/p>\n
For dividend stock investors, that’s a meaningful signal. Microsoft’s AI ambitions are not a distraction from its core business; they are the core business.<\/p>\n
Microsoft enjoys a wide AI moat.<\/p>\n
picture alliance/ Getty Images<\/p>\n
Broadcom: The custom chip dividend stock\u00a0<\/p>\n
Broadcom (AVGO) is a different kind of AI story, but no less compelling.<\/p>\n
AVGO stock pays an annual dividend of $2.60 per share, with a yield of approximately 0.85%. <\/p>\n
The company has raised its dividend for 14 consecutive years, with per-share dividend growth averaging nearly 31% over the past decade.<\/p>\n
Here’s the AVGO stock dividend breakdown:Dividend yield: About 0.85%Annual dividend per share: $2.60Quarterly dividend: $0.65Dividend growth (10-year average): Approximately 30.6%Consecutive years of dividend growth: 14Payout frequency: Quarterly<\/p>\n
Morningstar gives AVGO a four-star rating and a $500 fair value estimate, suggesting shares are trading about 61% below fair value. <\/p>\n
The firm assigns it a wide-moat rating but a “high” uncertainty tag \u2014 a nod to the volatility that often comes with the semiconductor space.<\/p>\n
Related: Morgan Stanley resets Broadcom price target after earnings<\/p>\n
The case for this dividend stock rests on its dominance in custom AI accelerators. Broadcom builds application-specific chips, or XPUs, for some of the biggest names in artificial intelligence.\u00a0<\/p>\n
Its CEO Hock Tan revealed on the company’s fiscal first-quarter 2026 earnings call that it now counts six customers for these chips, including Google, Anthropic, Meta, and, starting in 2027, OpenAI.<\/p>\n
The numbers are striking.\u00a0<\/p>\n
Broadcom’s AI semiconductor revenue surged 106% year over year in fiscal Q1 2026, reaching $8.4 billion.\u00a0Management guided for $10.7 billion in AI chip revenue next quarter, a 140% year-over-year jump.<\/p>\n
Morningstar sees Broadcom as the most important secondary AI compute vendor after Nvidia, benefiting directly from hyperscalers’ push to reduce their dependence on any single supplier.\u00a0<\/p>\n
Its networking chip business, which is growing even faster than its custom accelerators, adds another layer of strength.\u00a0<\/p>\n
The infrastructure software side, anchored by VMware, provides the steady, recurring cash flow that supports the dividend.<\/p>\n
The final takeaway<\/p>\n
The “anything but AI” mood that has gripped markets in 2026 has left two of the sector’s strongest companies looking attractively priced, according to Morningstar.<\/p>\n
Microsoft is a low-payout, high-growth dividend stock sitting atop a cloud and AI platform that keeps compounding. Broadcom operates an AI chip business that’s scaling faster than most analysts expected even a few months ago.<\/p>\n
Neither dividend stock pays a headline-grabbing yield. But for investors who think in years rather than quarters, both offer something harder to find: durable businesses, rising dividends, and AI tailwinds that may be just getting started.<\/p>\n
Related: Mega-cap dividend stock targets $9 trillion valuation<\/p>\n
#Morningstar #bullish #dividend #stocks<\/p>\n","protected":false},"excerpt":{"rendered":"
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