Are you looking for quality dividend stocks to hold in your portfolio? You may be tempted to look at financial stocks, defensive stocks, or simply businesses that are more closely associated with safety rather than growth potential. But growth stocks can make for potentially underrated income investments, especially in tech.
According to the most recent issue of the Janus Henderson Global Dividend Index, the top two dividend payers, in terms of actual cash paid out last year, were Microsoft (MSFT +1.62%) and Apple (AAPL +3.26%). Although they don't offer the highest yields, these companies have been paying a ton in dividends. And in the long run, they could become great dividend growth stocks.
Microsoft: $20.7 billion
Tech giant Microsoft paid out the most in dividends last year, with a generous $20.7 billion paid out to its shareholders over its most recent four quarters. The company has routinely been on the list of the top dividend payers, and it has occupied one of the top three spots in each of the past four years.
NASDAQ: MSFT
Key Data Points
You might be surprised that the stock ranks so highly given that Microsoft's yield looks incredibly underwhelming at just 0.7%, which is far below the S&P 500 average of 1.4%.
But with the company having more than 7.4 billion shares outstanding and its current dividend now paying investors $3 per share over the course of a year, it's easy to see how that tally can get so high in a hurry. The yield, after all, is simply a function of the dividend per share divided by the stock price. And with Microsoft's stock trading north of $420, a $3 dividend isn't going to represent a big percentage of the price.
Microsoft's payout ratio is only 25% and there's plenty of room for the company to get bigger, especially since Microsoft anticipates that its top line could grow by $10 billion annually simply due to artificial intelligence. Plus, with its acquisition of video game maker Activision Blizzard now complete, it has also strengthened its growth opportunities in gaming.
The tech giant has generated $82.5 billion in profit over the trailing 12 months on revenue of $227.6 billion. With exceptional financial numbers and still a lot of growth left, this can be an excellent dividend stock to buy and hold for not only years but decades. Microsoft has been increasing its dividend for nearly 20 straight years.
Apple: $15.1 billion
Apple is a bit of a distant second on the list, paying shareholders $15.1 billion last year, but it was still good enough for second place. Like Microsoft, it's not uncommon to find Apple's name among the list of top dividend-paying companies. Apple has 15.4 billion shares outstanding and pays out $0.96 in dividends per share over the course of a year.
NASDAQ: AAPL
Key Data Points
Apple's business has been transitioning more toward services in recent years, which can be a great way for the company to upsell existing customers. Whether it's music, streaming, news, fitness, or other subscription options, there are many ways for Apple to deliver some additional value to its nearly 1.5 billion active iPhone users in the world.
The company is still focusing on growth initiatives as well. There are rumors it is working on its own chatbot some are calling "Apple GPT," which could lead to yet another subscription opportunity for the business. Apple's Vision Pro headset is another potential growth driver in the future, and it may be a way to enhance existing apps and services. The business still has plenty of room to get bigger in the years ahead, and the dividend that income investors receive is likely to grow as well.
Over the past 12 months, Apple has generated $385.7 billion in revenue and $100.9 billion in profit. Its payout ratio of 15% is even lower than Microsoft's. Its 0.6% yield, however, is also slightly lower. But the company has been regularly increasing its dividend payments since 2013 and with a boatload of profit, plenty of more growth opportunities, and an incredibly low payout ratio, this is another underrated dividend growth stock income investors shouldn't overlook.
