George Budwell, The Motley Fool

Tue, Jun 24, 2025, 5:00 AM5 min read

• Boring dividend stocks are becoming the smartest way to profit from AI's efficiency revolution.

• Companies using AI to slash costs and boost margins can sustain higher dividend payouts for decades.

• These five dividend payers offer current income plus the upside of AI-driven margin expansion.

• 10 stocks we like better than Microsoft ›

When companies deploy artificial intelligence (AI) to streamline operations, the results can be staggering. Microsoft (NASDAQ: MSFT) is using AI-powered code-completion tools to help developers write code 55% faster. Johnson & Johnson (NYSE: JNJ) is leveraging AI to accelerate drug-discovery timelines. IBM (NYSE: IBM) reported over $1 billion in generative AI revenue in a single quarter. These efficiency gains translate directly to the bottom line, creating sustainable cost savings that can flow to shareholders through dividends and buybacks.

Consider what happens when a company with $100 billion in revenue uses AI to improve efficiency by just 5%. That's $5 billion in cost savings flowing straight to the bottom line -- money that can fund dividend increases, share buybacks, and further AI investments. This virtuous cycle of AI deployment leading to margin expansion leading to shareholder rewards is already playing out across multiple industries. The five companies below have figured out how to turn AI from a buzzword into a profit-generating machine that benefits patient dividend investors.

Microsoft offers a modest 0.68% yield today, but don't let that fool you. With a rock-solid 24.4% payout ratio, the company has massive room to grow its dividend as AI supercharges its business. Microsoft isn't just selling AI through Azure and its OpenAI partnership -- it's using AI internally to optimize everything from coding to customer service. When a company generating $245 billion in annual revenue finds ways to boost efficiency by even 10%, that's $24.5 billion in potential savings flowing straight to the bottom line.

IBM yields 2.38% and has raised its dividend for 30 consecutive years, though its 114.2% payout ratio demands attention. The company's aggressive pivot to AI and hybrid cloud is already bearing fruit, with generative AI revenue jumping over $1 billion in the third quarter of 2024 alone. While the high payout ratio suggests IBM is stretching to maintain its long dividend growth streak, the AI-driven revenue growth could quickly bring that ratio back to sustainable levels. Watson's evolution from a game show novelty to an enterprise AI powerhouse shows IBM still has innovation in its DNA.