This post includes affiliate links. If you purchase anything through these affiliated links, 247wallst.com may earn a commission.
The market has clearly rewarded investors who have invested heavily in high-growth stocks for most of recent history. Any investor who came of investing age out of college following the Great Recession (most Millennials) really haven't seen a downturn in the tech sector. And when one was provided (the pandemic), those who bought that dip made out like bandits.
That said, it's clear that many seasoned investors are starting to rotate out of certain higher-growth and higher-valuation stocks into more defensive names, or smaller-cap stocks with more to gain from potential interest rate cuts from the Federal Reserve in September. This rotation has been underway for some time, and many think could be among the key catalyst that leads to a downturn in top growth stocks for the foreseeable future.
That said, not all large-cap growth stocks are the same. The three companies I'm going to highlight on this list are all Magnificent 7 names, but there's one key distinction that's worth pointing out. They pay dividends.
Whether that's a bonus for a long-term growth investor, or meaningful for those with mandates that only allow them to invest in dividend-paying stocks, there are other reasons why these dividend-paying growth stocks are worth considering right now.
Here's why these are among the dividend-paying growth stocks I think investors should be paying attention to.
Key Points About This Article:
- Fast-growing companies have outperformed the market for a long time, and while that dynamic may be waning, some are clearly better than others.
- Here are three dividend-paying growth stocks that provide the right mix of defensiveness and long-term upside investors may want to seek out in this current market environment.
- If you’re looking for some stocks with huge potential, make sure to grab a free copy of our brand-new “The Next NVIDIA” report . It features a software stock we’re confident has 10X potential.
Meta Platforms (META)
Meta Platforms logo on a sign in front of the company's office buildings
Meta Platforms ( NASDAQ:META ) is a social media behemoth which really doesn't require much in the way of introduction. The company's cores business remains strong, with the company posting 20% year-over-year revenue growth on the back of ad impressions and pricing increases of 10% this past quarter. But the kicker was that the company's net income soared much higher, rocketing 73% over the past year to $13.5 billion on the back of strong cost control measures being put in place.
Meta's so-called year of efficiency in 2023 has carried over into this year, with the company continuing to focus on its bottom line and passing value back to shareholders. With the company's f irst-ever dividend announced earlier this year, investors can be assured that with the amount of cash this giant is spitting off, dividend hikes are certainly likely moving forward. With a dividend yield of just 0.4% and a measly payout ratio of 5%, there's ample room for the company to massively increase its distributions over time, should it choose to do so.
What makes the company so enticing is not only its scale (serving 3.3 billion daily active users across its platforms), but its growth prospects. The company is continuing to integrate AI into its offerings, and continues to expand its data center footprint accordingly. Indeed, the company's recently-announced new 715,000-square-foot data center in South Carolina is Meta's 22nd such facility in the US and 26th globally.
For those looking to bet on a dividend-paying growth stock with a meaningful long-term growth trajectory, Meta continues to be one of my top picks right now.
Alphabet (GOOG)
An Alphabet office building, with the Google logo portrayed prominently on the side
Another top tech behemoth that recently announced its first dividend in April, Alphabet ( NASDAQ:GOOG ) is another top pick of mine. Like Meta, Alphabet's current dividend yield is very small at 0.5%, with an even smaller payout ratio of less than 3% . Thus, as far as companies with room to raise their dividend distributions are concerned, Alphabet should top most investors' lists as a top idea on big dips in the future.
Like the other tech companies son this list, Alphabet has been increasingly focusing its efforts on intensifying its AI growth investments. Now, Alphabet has been a pioneer in the world of AI, using various algorithms for its core search business for decades. But as far as current trends are concerned, the company's shift toward generative AI with its Gemini model has impressed many, though hiccups have been seen along the way.
Ultimately, I think Alphabet has among the most to gain from its AI integrations with its Google search engine over time. And while the company expects to rollout new features in the coming quarters, investors don't seem to be as excited about this name as with other AI-related tech stocks. That's driven meager year-to-date gains relative to other peers in this space, and a rather attractive valuation multiple of just 21-times forward earnings I find to be compelling.
Alphabet is one of those cash cow dividend-paying growth stocks I think investors will kick themselves for not owning over the long-haul. That's been true for more than two decades, for good reason.
Microsoft (MSFT)
A Microsoft sign in front of one of the company's buildings
Microsoft ( NASDAQ:MSFT ) rounds out this list of dividend-paying growth stocks. And unlike the first two entrants on this list, Microsoft has been a dividend-paying behemoth for some time. In fact, I remember a time (around a decade ago) where Microsoft stock could be bought with a dividend yield of more than 3%. Those were the days.
Given the incredible price appreciation Microsoft has seen over the years, its dividend yield has dwindled to just 0.7%, with a 24% payout ratio. So, Microsoft has clearly focused on returning much more cash flow to investors via dividends, and raising its distributions over time. But it's a good sign that the capital appreciation Microsoft has provided has compressed its multiple - at least, for those investors who bought Microsoft a decade or more ago and just held.
I think this is a long-term gem that will continue to be a beneficial core portfolio holding in the coming decade as well. Recession or not, companies everywhere will continue to use Microsoft's core suite of software products. And I don't think cloud spending will crash anytime soon.
If you're in that camp, Microsoft is a dividend-paying growth stock to consider adding on big dips in the future. We haven't seen a meaningful dip in some time, so holding and being patient is key with such stocks. But when the opportunity comes, this is a mega-cap tech stock I think investors want to back the truck up on and wait.
“The Next NVIDIA” Could Change Your Life
If you missed out on NVIDIA’s historic run, your chance to see life-changing profits from AI isn’t over.
The 24/7 Wall Street Analyst who first called NVIDIA’s AI-fueled rise in 2009 just published a brand-new research report named “The Next NVIDIA.”
Click here to download your FREE copy.
Most Popular
Comments / 0