I’ve never been one to hop on bandwagons, whether in investing or in life in general.

In my world, both personal and financial, I’m drawn to tried-and-true wisdom, the timeless things. Building my passive income as quickly as possible, I stick with high-quality, dividend-growing, low-risk compounders in my investment portfolio. No flash, no tricks—just the steady beat of dividends.

Nonetheless, even a seasoned dividend investor like me can’t deny the sheer greatness of the 7 mega-cap corporations that dominate the stock market indexes.

Since the Roundhill Magnificent Seven ETF (MAGS) was launched in the Spring of 2023, these 7 titans have outperformed the S&P 500 (SPY), more than doubling its total returns in less than a year.

When considering the rebound of the US economy since the Great Financial Crisis in 2010, these demigods—Nvidia (NVDA), Tesla (TSLA), Microsoft (MSFT), Apple (AAPL), Amazon (AMZN), Meta Platforms (META), and Alphabet/Google (GOOG)—have all outperformed the market by at least double, with Nvidia leading the charge with its legendary growth driven by top-tier gaming, data center, and artificial intelligence microchips.

Their remarkable expansion has rendered these 7 titans as large as entire developed economies on their own. For instance, Apple and Microsoft, each sport market caps about the same size as the entire GDP of France and the entire market cap of the United Kingdom stock market (EWU) combined.

Collectively, these Magnificent 7 boast about the same total market cap as the entire stock markets of the next three largest national exchanges in the world besides the US.

If we extend the list to the 10 largest companies in the S&P 500, which includes Berkshire Hathaway (BRK.A, BRK.B), Broadcom (AVGO), and Eli Lilly (LLY), maker of the blockbuster diabetes/weight loss drug Mounjaro, the top 10 combined market cap makes up 35% of the total S&P 500 index.

This 35% is above-average, reminiscent of the 2000 dot-com bubble, when the two largest stocks, Microsoft and Apple, together accounted for 15% of the total index.

Today’s top stocks by size are more reminiscent of the year 2000 than of 1990 when only one of the top 10 stocks in the S&P 500 was a tech stock—International Business Machines (IBM).

In 2000, 5 of the top 10 largest companies were tech names. Microsoft alone accounted for 3.8% of the total index.

It’s not uncommon for the biggest companies in the stock market to be extraordinarily large, but even by historical standards, today’s corporate giants are abnormally larger. Microsoft’s ~7.5% share of the total S&P 500 market cap is bigger today than it was at the beginning of the year 2000.

It’s not that these titans haven’t earned their place in the stock market hall of fame, nor that they are dramatically overvalued relative to their growth rates. But how long can their magnificent run go on?

The Nasdaq 100 Index (QQQ), dominated by the Mag 7, exhibits a level of total return outperformance against the Vanguard Real Estate Index (VGSIX, VNQ) not seen since the 2000 dot-com bubble. This level of outperformance over real estate hasn’t been seen since techy growth stocks were in a bubble.

The 2024 Outlook for Dividend Stocks: A Dance with Inflation and Market Dynamics

A fascinating financial tango is unfolding in the market as investors make moves driven by a perceived push and pull of inflation dynamics. Seemingly steady dividend stocks are vying for attention amidst the ebb and flow of market sentiment. Let’s navigate this sea of data and sentiment to uncover potential opportunities in the year ahead.

The Last Stand of the “Higher For Longer” Narrative

Is the narrative of “stubborn inflation” losing its shine? Spin the globe, and you’ll find a tug of war between market sentiments. The dominant narrative of a challenging road back to 2% inflation is being put on trial. Yet, is this ‘stubborn inflation’ narrative more bark than bite?

Doubts are starting to surface about the validity of the CPI numbers which stubbornly show over 2% inflation. Shelter costs, a key component, have been lagging and slowing down to reflect the real-time market indicators. Excluding this lagging factor, the CPI has been consistently below the 2% mark. The stage where the dogged “higher for longer” narrative tries to hold its ground is slipping.

In this market melee, car insurance costs are currently painting a picture of real-time price pressures. However, a closer look reveals that these spikes are mostly trailing effects of earlier car and auto parts price increases. As those factors taper off, the insurance premiums are likely to mirror that trend. The real-time inflation is subtly signaling a shrinking below the 2% mark and showing no evident signs of a robust resurgence.

The market selloff could very well mark the last hurrah of the “higher for longer” narrative. As the dust settles, the landscape might shift in favor of a different market sentiment.

The Magnificent 7 Dividend Stocks

If the macro wind blows in the direction of dropping inflation and a looming Fed Funds Rate cut, dividend stocks could emerge as the market’s dark horse. But which stocks could potentially outshine even the Magnificent 7 in 2024?

Potential contenders for this dividend stock ‘crown’ include Agree Realty (ADC). This net lease REIT strategically invests its portfolio in single-tenant retail properties leased to robust retail giants.

ADC’s tenant base largely comprises well-established, investment-grade corporations, making it a sturdy presence in the retail real estate market. A sound balance sheet, low debt, and a favorable cost of capital all work in ADC’s favor, amplifying its potential to turn heads in the year. And with approximately 70% of its tenants being investment-grade-rated corporations, ADC sits on solid ground for potential future gains.

The Current Landscape of High-Quality Dividend Stocks: A Closer Look

Amid the backdrop of market fluctuations and economic uncertainties, the clamoring for unshakeable dividends reminiscent of the Magnificent 7 has surged. Heightened inflation, steep interest rates, and a fair share of headwinds have incited a profound uneasiness among investors. However, within this turbulence, a selective array of dividend stocks warrant attention. Notably, the magnificent seven dividend stocks, namely – American Electric Power (AEP), Brookfield Renewable (BEP, BEPC), Medtronic (MDT), NextEra Energy Inc. (NEE), PepsiCo (PEP), and Verizon (VZ) – have come under the keen scrutiny of discerning investors.

Resilience Amidst Volatility

The financial landscape ushers in volatility comparable to a tempest encountering a sturdy oak. Whether it be the regulatory tussles of AEP or the material cost woes faced by Brookfield Renewable, each company has confronted distinctive trials. Amid such adversity, these high-quality dividend stocks have demonstrated unwavering resilience.

Rekindling Growth Amidst Uncertainty

In the wake of a turbulent market, prospects for growth seemingly appear akin to navigating through uncharted territory. For instance, while Medtronic has grappled with pandemic-induced impediments, signs of resurgence in the elective surgeries segment bode well for its future trajectory. Such rejuvenation amidst the uncertain expanse warrants a closer inspection.

Riding the Tides of Change

As the market ebbs and flows, it’s inevitable to experience reverberations akin to an unending rollercoaster ride. The precipitous decline and subsequent resurgence of Verizon bespeak the undulating journey through the stock market. Nevertheless, with a steadfast resolve, these dividend stocks continue to ride the tides of change.

Identifying Opportunities Amidst Decline

Amid the ebb and flow of the market, these high-quality dividend stocks have descended to historically low valuations. With valuations reaching their nadir, investors find themselves at an opportune juncture, poised to capitalize on these attractive prospects for dividends.

Springboard to Prosperity

These dividend stocks hold the potential to represent a springboard, catapulting investors towards the gateway of prosperity. Navigating through the labyrinth of high-quality dividend stocks, synonymous with hidden treasures, attributes an air of serendipity to this remarkable endeavor. In the words of George Matthew Adams, “There’s no such thing as a self-made man. You will reach your goals only with the help of others.”

The Outlook

Amidst this chorus of fluctuating market sentiments and enduring uncertainties, these high-quality dividend stocks stand poised to weather the storm. Their fortitude amidst market undulations endows them with the capability to embellish an investor’s portfolio. We stand witness to an opportune moment, a juncture redolent with the potential to yield dividends far beyond mere monetary enticements – dividends that bear the imprints of resilience, stability, and long-term growth.

In summary, the saga of these magnificent seven dividend stocks unfolds as a tale of resilience amidst volatility, rekindling growth amidst uncertainty, and a springboard to prosperity. While each narrative harbors its share of trials and tribulations, the underlying thread weaves a story of unwavering fortitude amidst a capricious financial landscape – one that beckons investors towards a realm teeming with untapped potential.