Investing in growth stocks doesn’t always mean forgoing dividend income. While many growth stocks don’t offer dividends, the “Magnificent Seven” stocks stand out as exceptions. These stocks, known for their robust growth, also have various dividend policies that could strengthen your investment strategy.
A Decisive Split Over Dividends
Among the “Magnificent Seven” stocks, a clear division emerges in dividend practices. While all these companies possess the financial capacity to pay dividends, only four actually do so.
Microsoft (NASDAQ: MSFT) instituted its dividend program back in 2003, demonstrating a consistent commitment to rewarding shareholders. This tech giant has managed to enhance its dividend payouts every year since its inception.
Apple (NASDAQ: AAPL) reinitiated its quarterly dividend payments in 2012 after a long hiatus since 1995. Similar to Microsoft, Apple has a track record of steadily increasing its dividend distributions over the years.
Nvidia (NASDAQ: NVDA) emerged as an unexpected dividend stock in the Magnificent Seven when it initiated quarterly dividends in 2012. Although its dividend increases have stabilized since late 2019, Nvidia remains a notable dividend contributor in the tech sector.
Meta Platforms (NASDAQ: META) is the newest entrant to the list of dividend-paying “Magnificent Seven” stocks, having commenced its dividend program earlier in 2024.
Conversely, Amazon, Alphabet, and Tesla currently do not offer dividends. Nevertheless, experts believe that pioneering companies like Amazon and Alphabet might transition to paying dividends in the near future, potentially beginning as early as this year, as per predictions by Goldman Sachs analysts.
Calculating the Dividend Earnings
Imagine investing $70,000 across the Magnificent Seven stocks. If you allocated $10,000 to each stock, you could rake in just under $170 in dividends. Here’s a breakdown of how much dividend income each stock would contribute:
| Stock | Dividend Yield | Annual Dividend Income |
|---|---|---|
| Microsoft | 0.71% | $71.00 |
| Apple | 0.56% | $56.00 |
| Meta Platforms | 0.41% | $41.00 |
| Nvidia | 0.018% | $1.80 |
| Amazon | N/A | $0.00 |
| Alphabet | N/A | $0.00 |
| Tesla | N/A | $0.00 |
| Total | $169.80 | |
Data source: Google Finance. Calculations by author. N/A = Not Applicable.
However, focusing solely on dividend income may lead you to overlook the potential of growth stocks like Amazon, Alphabet, and Tesla. These companies tend to prioritize growth over dividends. If you were to invest $70,000 evenly among the four dividend-paying Magnificent Seven stocks ($17,500 each), your projected dividend earnings would increase significantly:
| Stock | Dividend Yield | Annual Dividend Income |
|---|---|---|
| Microsoft | 0.71% | $124.25 |
| Apple | 0.56% | $98.00 |
| Meta Platforms | 0.41% | $71.75 |
| Nvidia | 0.018% | $3.15 |
| Total | $297.15 | |
Data source: Google Finance. Calculations by author. N/A = Not Applicable.
Considering a projected annual dividend income of under $300 from an initial $70,000 investment, most income-focused investors might seek higher dividend yields elsewhere.
The Limits of Magnificence
Despite their growth potential, the Magnificent Seven stocks showcase limited dividend allure. Even the most substantial dividend contributor, Microsoft, offers a yield barely exceeding half that of the S&P 500.
For investors eyeing substantial dividend income, myriad other stocks stand out more prominently than the Magnificent Seven. These stocks offer robust dividends that may be more aligned with income-oriented investment strategies.
