KLAC is a strong long-term investment and technology bet due to high growth and dividend increases, despite a valuation that is 37% higher than the sector.

We will move on to the semiconductor sector with the giants who work behind the scenes and quietly dominate the supply chain of artificial intelligence devices, yet are rarely talked about even though they offer investors one of the fastest growing dividend payouts in the technology sector.

These are the kings of chip testing and measurement, KLA Corporation. The trading symbol is KLAC.

This was actually BlackRock's smallest acquisition of $54 million in new shares added in the last quarter, while the other acquisitions were in the billions of dollars.

However, BlackRock's stake in KLA alone amounts to $38 billion in total, as it has always been one of BlackRock's favorite technology stocks to increase its investment in over the years.

This latest acquisition comes at an opportune time, as KLA had been thriving for the past decade before recently suffering a major blow that saw it lose about 40% of its value from its peak.

This was driven by a wave of market panic, as investors worried about a cyclical slowdown in chip equipment, as well as ongoing concerns about US export restrictions, specifically to China, and even Wall Street panic over the initial spending by tech giants on the entire AI boom.

But here's the likely reason why BlackRock continues to pour so much money into this stock when it's down, regardless. First, KLA's competitive trench is extremely strong.

However, with these advanced AI processors packed with tens of billions of microscopic transistors, manufacturing them without any microscopic defects becomes virtually impossible.

If even a tiny speck of dust or microscopic defect is found on a wafer in a foundry, they could end up losing millions of dollars worth of damaged silicon. This is where KLA comes in, which manufactures high-precision optical inspection machines with electron beams that scan wafers at the nanometer level to detect any defects before the wafers are encapsulated.

In fact, KLA controls more than half of the entire global semiconductor process monitoring market. It serves as a key payment gateway for the entire semiconductor industry, if you think about it that way.

Last year, for example, KLA achieved sales of nearly 13.6 billion, an increase of about 12% over the previous year. Well, approximately 5 billion of that amount was converted directly into pure net profit.

More importantly, analysts expect sales to accelerate even further next year, with revenue growth exceeding 33%, while net income will rise to more than 10 billion in the next two years, setting new record levels.

All these rising financial indicators are the precise reason behind their ability to increase their dividend payouts by such a large amount. Now, on the surface, the initial dividend yield looks very small, at only about half a percent.

But with a small distribution rate of only about 20%, there will be plenty of room to continue increasing it over time, which is exactly what we have seen from them so far with a growth rate of nearly 18% over 16 years of consecutive increases.

About 10 years ago, this stock was trading at less than $7 per share. Well, if we take the 92 cents they currently pay as dividends per share, that translates to a dividend yield of about 13.5 percent.

That is, if you bought this stock 10 years ago, you would now receive dividends of more than 13% every year, in addition to the huge increase in the stock price itself.

With dividend growth stocks, you typically want a business that also grows at high rates. Well, that's exactly what KLA does. It is a very high-growth company, just like all the other stocks we will be talking about today.

But when you add to that growing dividend payouts, you're talking about phenomenal investment returns.

Well, for these reasons, I think this stock is very strong for long-term investment. I think it's a great bet on future technology in and of itself, and when you add those growing cash dividends as a bonus, it looks very strong.

I'm not saying this will happen anytime soon, because I think there's huge demand for artificial intelligence, but the other concern is that even after the price drop we saw in KLA, the valuation is still fairly high.

The stock is trading at about 37% more than the sector even on a more forgiving price-to-earnings-to-growth (PEG) basis, which takes growth into account.

For these reasons, I'll put them in third place in the middle for now until we see the other options on the list, but I certainly understand why BlackRock would buy this stock when its price was low as it's a fundamental technology bet and a dividend growth stock.