Investors love dividend stocks because they provide dependable income and a great opportunity for solid total return. Total return includes interest, capital gains, dividends, and distributions realized over time. In other words, the total return on an investment or portfolio consists of income and stock appreciation.

But what if you are a growth stock investor eyeing some of the hottest stocks now? Many still view the Magnificent 7, a group of stocks that helped push the market higher in one of the biggest bull market runs in the last 30 years, as the best stocks to buy for long-term and perhaps even short-term capital gains.

Magnificent 7 rules in 2023

Included in the group are mega-cap stocks Apple (NASDAQ: AAPL), Alphabet (NASDAQ: GOOGL), Microsoft (Nasdaq: MSFT), Amazon.com (NASDAQ: AMZN), Meta Platforms (NASDAQ: META), Tesla (NASDAQ: TSLA) and Nvidia (NASDAQ: NVDA). In 2023, the Magnificent 7 stocks logged an impressive average return of 111%, compared to a 24% return for the broader S&P 500.

So far in 2024, the Magnificent Seven stocks combined are up close to 17%, on average, which doubles up the approximately 8.5% return for the S&P 500

The Profits from these stocks are Huge

CNBC reported earlier this year that Deutsche Bank maintains that the profits from this combination of stocks are more than all listed companies in almost every G-20 country. Only China and Japan have greater profits when their listed companies are combined. 

While the profits are enormous, the dividends are small

Four of the seven companies pay dividends, all considerably less than 1%. Investors looking for passive income may have little interest in low payouts, but one of the companies with the highest dividends could be a worthwhile stock to invest in in the future. 

When comparing the dividend-paying stocks Microsoft looks best

Microsoft pays a slightly higher 0.72% dividend than Apple’s 0.52%, so taking the higher yield from a dollar amount perspective makes sense. 

Supporting the dividend is decidedly in Microsoft’s favor

With massive cloud computing revenue from Azure, the ongoing evergreen computer software business, and the investment in ChatGPT creator Open AI, the company has broad corporate strength and a vast moat to keep the competition at a distance. Add in the fact that Apple faces numerous headwinds, not the least of which is sales in China, plus weakening demand for some of its highly-priced products.

In addition, in concert with 16 other state and district attorneys general, the Justice Department filed a civil antitrust lawsuit against Apple for monopolizing or attempting to monopolize smartphone markets. From a corporate standpoint, the choice is clear.

The Magnificent 7 dividend winner is Microsoft

With a solid corporate structure and product lines, the ability to continue raising dividends, and the powerful potential for a stock split, Microsoft is a strong choice for investors over Apple for all the reasons above and many more. It’s important to note Microsoft hasn’t split its shares since 2003, and the stock is trading just below an all-time high. The potential for a stock split is enormous. 

While at the margin, buying Microsoft for the dividend isn’t the best reason to own this incredible company, it is a welcome addition that helps to increase the remarkable total return potential. 

 

 

 

 

 

 

 

 

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