Most mega-cap stocks are household names. These are the corporations that have market caps above $250 billion and are the leaders within their industries. While smaller companies may grow faster than the mega-cap stocks, these giant companies are less susceptible to sharp corrections. When mega-caps do go through corrections, they almost always come back stronger.
If you own a market weighted index like the S&P 500 or the Nasdaq Composite, you already have exposure to plenty of mega-cap stocks. These corporations heavily influence the stock market’s overall performance. Some of them are even bellwethers investors use to gauge the current state of the economy.
Investors should look for mega-cap stocks that have rising revenue and profits. It’s also a good sign if a mega-cap corporation is capitalizing on multiple growth catalysts. While dividends aren’t a requirement for good returns, they are a nice bonus. Luckily, all three mega-cap stocks on this list pay out quarterly dividends to their shareholders.
Visa (V)
Visa (NYSE:V) is the leading credit and debit card issuer. The fintech company has a market cap of just above $500 billion. While shares remain flat year-to-date, the stock is up by 45% over the past five years. It also trades at a reasonable 30 P/E ratio and offers a 0.80% yield. Visa has done a good job with dividend growth, maintaining an annualized 17.92% growth rate over the past decade.
The company reported a solid Q3 FY24 that featured 10% YOY revenue growth. While net revenue reached $8.9 billion, GAAP net income came to $4.9 billion. Profits grew by 17% YOY, resulting in a 54.7% net profit margin. Visa regularly reports profit margins above 50% as it gains more market share in the credit and debit card industry.
Cross-border volume was a key growth driver, up by 14% YOY. The company’s growth and strong financials helped the firm reward shareholders with $5.8 billion worth of stock buybacks and dividend distributions.
Broadcom (AVGO)
Broadcom (NASDAQ:AVGO) is an AI chipmaker that is gaining market share in a rapidly growing industry. According to Grand View Research, the artificial intelligence industry is projected to maintain an annualized 36.6% growth rate from now until 2030.
Broadcom’s financial results hint at its success in the AI industry. The company generated a record $3.1 billion from AI products in the second quarter of fiscal 2024. Those results came amid a quarter that featured $12.5 billion in total revenue. Broadcom’s total revenue increased by 43% YOY thanks to the VMware acquisition, and that’s not the only thing that is rising.
The chipmaker has gained 37% year-to-date for its investors. Furthermore, the stock is up by more than 400% over the past five years. Investors get to enjoy a decent 1.42% yield from a promising dividend growth stock. Broadcom has maintained a double-digit dividend growth rate for several years and will likely continue that stretch for a while.
Alphabet (GOOG, GOOGL)
Alphabet (NASDAQ:GOOG, NASDAQ:GOOGL) is the world’s leading online advertiser with a $2 trillion market cap. It’s also gaining market share in the cloud computing industry and is the third-largest cloud provider. The stock has been a reliable outperformer. It’s up 19% year-to-date (as of writing) and has rallied 178% over the past five years.
Alphabet stock is in the middle of a correction that presents a long-term buying opportunity, especially with a 24 P/E ratio. The tech giant also offers a 0.48% yield. The second quarter’s results highlight why the company’s stock has done well over the years. Revenue increased by 14% YOY while net income jumped by 29% YOY.
Cloud computing makes up more than 10% of Alphabet’s total revenue and is poised to accelerate due to AI tailwinds. Alphabet’s cloud segment exceeded $10 billion in revenue for the first time this quarter. Google Cloud’s operating profit exceeded $1 billion for the first time.
On this date of publication, Marc Guberti held long positions in AVGO and GOOG. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
On the date of publication, the responsible editor did not have (either directly or indirectly) any positions in the securities mentioned in this article.