The entire goal of investing is generating wealth over time via capital appreciation and dividends. For income investors, dividend stocks that provide consistent and stable dividends over time (preferably with growth) are among the most sought-after assets in the market.
The thing is, finding dividend stocks on the Nasdaq 100 is harder than it looks. Many of the high-growth technology companies on this index historically have pumped their free cash flow back into their businesses. This makes sense since most of these companies can generate much higher returns on the capital they generate than paying it out to investors.
That said, a number of high-profile Nasdaq stocks do now pay dividends. Among the three companies I think can provide the best total returns (growth plus income) over time are the following three mega-cap giants.
Microsoft (MSFT)
Emerging as one of the best long-term investments in the market, Microsoft (NASDAQ:MSFT) boasts strong financials and a growth profile many investors clearly want to hang onto. The company has effectively pushed forward its AI plans via its massive investment in OpenAI and various product integrations. Despite some skepticism about AI, the technology revolutionized traditional search engines and productivity tools, enhancing Microsoft’s software suite.
However, Microsoft is one of the long-standing dividend stocks on the Nasdaq I think is worth considering. The company first initiated its dividend in 2003, more than two decades ago. Over that time, the company has actually paid more out to investors than their initial investment (compounded returns on its dividends alone of more than 100%). That’s to say nothing of the 15x returns investors would have received over this time frame as well.
There’s plenty of indication this growth will continue. The company has led the way in machine learning models as a service, leveraging its vast data resources and the Azure platform for scalable AI solutions. This boosted its data center revenue and enhanced enterprise functionality. With its tech dominance and deep research funding, Microsoft remains an integral player in the world of AI development.
Meta Platforms (META)
Another dividend stock to own is Facebook’s parent company Meta Platforms (NASDAQ:META). Shares of META stock have surged 42% year-to-date and 144% over the past five years. Despite this growth, the company has initiated its first-ever dividend this year, joining the likes of other high-growth tech companies that have signaled they’re pumping off more cash than they know what to do with.
Notably, Meta’s upcoming Q2 2024 earnings report is set to be released on July 31. The company anticipates better investor sentiment after its recent volatility. With the market pricing in a 19.5% increase in revenue this coming quarter, we’ll have to pay close attention to how the numbers come in. That’s partly because the company is up against tough comps from last year when Meta’s ad revenue rebounded significantly.
I think the story with Meta is an easy one to understand. Those bullish on the long-term upside social media companies provide can’t go wrong owning this name. And with a small dividend yield of just 0.4% (that’s expected to grow), there are now more reasons than ever to hold onto this gem.
Alphabet (GOOG, GOOGL)
One of the top contributors to the market’s return over this past quarter is Alphabet (NASDAQ:GOOG, NASDAQ:GOOGL). The company has boasted strong returns for investors, driven by its fundamentals. The company reported a 31% increase in operating income alongside various efficiency measures, which drove accelerated earnings growth. New AI features introduced at the Google I/O conference are likely to boost product value. Current share prices indicate a potential upside to Alphabet’s intrinsic value estimate.
The parent company of Google and YouTube, Alphabet provides investors with rock-solid cash flows the company has primarily used to pile back into its core business. However, the company has also recently added a dividend as well, with its current yield sitting just slightly above 0.4%.
So, like Meta, Alphabet’s management team appears to be signaling the company will be able to return capital to long-term shareholders in more ways than one. For many dividend-focused strategies, this can mean a broader investor base and greater demand for its shares. Overall, this is just one reason among many why this AI-linked company is seeing so much upside of late. I think the balance of risks for Alphabet remains positive right now.
On the date of publication, Chris MacDonald did not hold (either directly or indirectly) any positions in the securities mentioned in this article. 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 held a long position in GOOG.