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.
At 247 Wall St., we consistently emphasize the potential of total return to our readers, as it is one of the most effective ways to enhance the prospects of overall investing success. Once again, total return is the collective increase in a stock’s value plus dividends.
What if you can find stocks with gigantic growth potential and pay dividends, albeit smaller than many of Wall Street’s favorite passive income stocks? You may want to look at at least four of the Magnificent Seven stocks.
The Magnificent 7 NVIDIA Corporation (NASDAQ: NVDA | NVDA Price Prediction), Meta Platforms, Inc. (NASDAQ: META), Amazon.com, Inc. (NASDAQ: AMZN), Microsoft Inc. (NASDAQ: MSFT), Apple, Inc. (NASDAQ: AAPL), Alphabet Inc. (NASDAQ: GOOGL), and Tesla (NASDAQ: TSLA), which make up 28% of the S&P 500, accounted for almost 65% of the yearly returns for 2023.
In addition, the combined weight of those companies is more significant than any combined weight of the top 7 companies in the venerable index since the late 1990s. Each of the seven stocks has outperformed the S&P 500 by over 100% in the past decade.
Four companies pay dividends, with one recently adding the dividend for the first time. Top Wall Street firms rate all companies Buy, and all have substantial total return potential. It should be noted that Nvidia pays a tiny $0.16 dividend, which is all but negligible, with a stock trading at almost $900.
Why are we covering this
Magnificent Seven stocks—Nvidia, Meta, Amazon, Microsoft, Alphabet, Apple, and Tesla—gained at least 49% in 2023.
For growth stock investors with a higher risk tolerance, buying the Magnificent 7 stocks that pay dividends makes sense, especially for younger investors with a longer time horizon. Not only will the dividend add to the total return potential, but there is always a good chance these top companies can raise the dividend over time.
Alphabet
Alphabet is the world’s third-largest technology company by revenue.
Better known to many as Google, Alphabet Inc. (NASDAQ: GOOGL) recently announced its first dividend, which will pay investors 0.46%. Shareholders on record as of June 10 will be paid a dividend of $0.20 per share on June 17.
The company recently blew out earnings, initiated the dividend, and announced a massive $70 billion stock buyback plan. That kicked off a 16% rally in the shares, which was the biggest for the stock since July 2015.
Alphabet Inc. offers various products and platforms in the United States, Europe, the Middle East, Africa, the Asia-Pacific, Canada, and Latin America.
It operates through three segments:
- Google Services
- Google Cloud
- Other Bets
The Google Services segment provides products and services, including:
- Ads
- Android
- Chrome
- Devices
- Gmail, Google Drive, Google Maps, Google Photos, Google Play, Search, and YouTube.
It is also involved in selling apps, in-app purchases, digital content on Google Play and YouTube, and devices and in providing YouTube consumer subscription services.
The Google Cloud segment offers infrastructure, cybersecurity, databases, analytics, AI, and other services; Google Workspace that include cloud-based communication and collaboration tools for enterprises, such as Gmail, Docs, Drive, Calendar, and Meet; and other services for enterprise customers.
The Other Bets segment sells healthcare-related and internet services.
Apple
Apple Inc. is an American multinational corporation and technology company headquartered in Cupertino, California,.
The stock has lagged dramatically despite exciting new products like the iPhone 15. Still, it offers a 0.57% dividend. Apple Inc. (NASDAQ: AAPL) designs, manufactures, and markets smartphones, personal computers, tablets, wearables, and accessories worldwide.
The company offers iPhones, a line of smartphones; Macs, a line of personal computers; iPads, a line of multi-purpose tablets; and wearables, home, and accessories comprising AirPods, Apple TV, Apple Watch, Beats products, and HomePod.
The company also provides AppleCare support and cloud services. It operates various platforms, including the App Store, allowing customers to discover and download applications and digital content, such as books, music, video, games, and podcasts.
Apple’s commitment to diversification is evident in its wide range of services. These include :
- Apple Arcade, a game subscription service
- Apple Fitness+, a personalized fitness service
- Apple Music, which offers users a curated listening experience with on-demand radio stations
- Apple News+, a subscription news and magazine service
- Apple TV+, which offers exclusive original content
- Apple Card, a co-branded credit card
- Apple Pay, a cashless payment service
The company also licenses its intellectual property, further expanding its revenue streams.
Apple’s customer base is broad and diverse, serving consumers and small and mid-sized businesses. The company has a strong presence in the education, enterprise, and government markets, further enhancing its stability.
It distributes third-party applications for its products through the App Store and sells its products through various channels, including its retail and online stores, and third-party cellular network carriers, wholesalers, retailers, and resellers.
Meta Platforms
Meta owns and operates Facebook, Instagram, Threads, and WhatsApp, among other products and services.
The Facebook and Instagram owners posted massive results, but a disappointing outlook for the second quarter tempered expectations. Meta Platforms, Inc. (NASDAQ: META) offers investors a 0.45% dividend and engages in the development of products that enable people to connect and share with friends and family through:
- Mobile devices
- Personal computers
- Virtual reality headsets
- Wearables
It operates in two segments:
- Family of Apps
- Reality Labs.
The Family of Apps segment offers:
- Facebook, which enables people to share, discuss, discover, and connect with interests
- Instagram, a community for sharing photos, videos, and private messages, as well as feed, stories, reels, videos, live, and shops
- Messenger, a messaging application for people to connect with friends, family, communities, and businesses across platforms and devices through text, audio, and video calls
- WhatsApp, a messaging application that people and companies use to communicate and transact privately
The Reality Labs segment provides augmented and virtual reality-related products comprising consumer hardware, software, and content that help people feel connected anytime and anywhere.
Microsoft
Microsoft’s best-known software products are the Windows line of operating systems, the Microsoft 365 suite of productivity applications, and the Edge web browser.
This legacy tech giant also blew out first-quarter results and pays a 0.74% dividend. Microsoft Inc. (NASDAQ: MSFT) develops and supports software, services, devices and solutions worldwide.
The Productivity and Business Processes segment offers:
- Office
- Exchange
- SharePoint
- Microsoft Teams
- Office 365 Security and Compliance
- Microsoft Viva
- Microsoft 365 Copilot
- Office consumer services, such as Microsoft 365 consumer subscriptions
- Office licensed on-premises and other Office services
This segment also provides LinkedIn and dynamics business solutions, including Dynamics 365, a set of intelligent, cloud-based applications across ERP, CRM, power apps, and power automation, and on-premises ERP and CRM applications.
The Intelligent Cloud segment offers server products and cloud services, such as:
- Azure and other cloud services
- SQL and Windows servers
- Visual Studio
- System Center
- Related client access licenses, as well as nuance and GitHub; and enterprise services, including enterprise support services, industry solutions, and nuance professional services.
The More Personal Computing segment offers:
- Windows, including Windows OEM licensing and other non-volume licensing of the Windows operating system
- Windows commercial comprising volume licensing of the Windows operating system, windows cloud services
- Windows commercial offerings; patent licensing
- Windows Internet of Things; and devices, such as surface, HoloLens, and PC accessories
Additionally, this segment provides:
- Gaming, which includes Xbox hardware and content, and first- and third-party content
- Xbox game pass and other subscriptions
- Cloud gaming
- Advertising
- Third-party disc royalties, and other cloud services
- Search and news advertising, which includes Bing, Microsoft News and Edge, and third-party affiliates
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