These 2 "Magnificent Seven" Stocks Dominate This $1.7 Trillion Annual Outlay

These 2 “Magnificent Seven” Stocks Dominate This $1.7 Trillion Annual Outlay

Companies paid their shareholders a staggering $1.7 trillion in dividends last year. That was up 5% from the prior year, setting a new record.

The leading dividend payers might come as a surprise. Tech titans Microsoft (NASDAQ: MSFT) and Apple (NASDAQ: AAPL) led the way in dividend payments last year. They’re part of the much-lauded “Magnificent Seven” stocks, which are more known for their ability to deliver outsize stock price appreciation than income. Here’s a look at their dividend outlays last year and where some of their Magnificent Seven rivals stand as dividend stocks.

The dividend king

Microsoft paid $20.7 billion in dividends last year, leading the globe in that category. That massive outlay enabled the technology giant to reclaim the top spot among dividend payers, a title it last held in 2020. Microsoft was second in 2021 and held third place in 2022 after falling behind Australian mining giant BHP Group, which led the way in those two years. BHP Group fell to sixth last year due to the variable nature of its dividend, which ties the payout to its commodity price-driven profits. Meanwhile, Microsoft has increased its dividend per share by 10% in each of the past two years.

The tech titan can easily afford its massive dividend outlay. Over the past six months, it has generated $49.4 billion in net cash from operations. It paid $10.6 billion in dividends and repurchased another $8.8 billion of its shares. Meanwhile, it ended last year with $81 billion of cash, equivalents, and short-term investments on its balance sheet against $74.2 billion of total debt.

Microsoft’s strong balance sheet and enormous and growing cash flows have enabled it to steadily increase its dividend. With ample growth catalysts, including massive investments in video games and AI, with its purchase of Activision and its investment in OpenAI, Microsoft should be able to continue paying more money in dividends in the coming years.

Playing second fiddle

Apple came in second to Microsoft in dividend payments last year at $14.9 billion, putting it right behind oil giant ExxonMobil. The company increased its dividend per share by 4% last year, its 11th straight year of increasing the payout.

Like Microsoft, Apple can easily afford its massive dividend outlay. It produced $39.9 billion in cash from operating activities in its fiscal first quarter of 2024. That easily covered its $3.8 billion dividend outlay in the period. Apple also repurchased a massive $20.1 billion in stock during that quarter. Meanwhile, like Microsoft, Apple has a cash-rich balance sheet. It ended 2023 with $172.6 billion of cash, equivalents, and marketable securities against $108 billion of debt. Given its monster cash flows and financial strength, Apple could easily overtake Microsoft as the top dividend payer in the future.

Where does the rest of the Magnificent Seven stand?

Of the companies in the Magnificent Seven, Nvidia (NASDAQ: NVDA) was the only other member to pay dividends last year. The semiconductor giant paid $395 million in dividends, which is paltry compared to Apple and Microsoft. It plans to maintain that level in its current fiscal year.

However, it’s not due to a lack of free cash flow. The company is cashing in on the AI boom. Its free cash flow skyrocketed in fiscal 2024 to an eye-popping $26.9 billion, up from $3.8 billion in fiscal 2023. It’s using that money to buy back stock. It repurchased $9.5 billion in fiscal 2024 and aims to tap the remaining $22.5 billion of its existing authorization by the end of its current fiscal year.

The group will have at least one more dividend payer this year. Meta Platforms (NASDAQ: META) initiated a dividend earlier this year. The social media giant will pay about $5 billion in dividends this year at its initial rate. It can easily afford that outlay. It’s about 12% of its annual free cash flow, and a similar percentage of the cash currently sitting on its balance sheet.

Other Magnificent Seven members could join Meta Platforms as meaningful dividend payers in the future. Search giant Alphabet (NASDAQ: GOOG)(NASDAQ: GOOGL) certainly has the financial resources to pay dividends. It produced over $100 billion in net cash from operating activities in its last fiscal year, roughly 60% of which it returned to shareholders through repurchases. Like its rivals, Alphabet could pay a dividend while repurchasing a meaningful amount of shares each year.

Magnificent dividend stocks

Technology giants generate massive amounts of free cash flow. Microsoft and Apple are using a big chunk of that money to pay dividends, enabling them to lead the world in that category last year. Many of their Magnificent Seven peers also produce prodigious amounts of cash that they could pay out in dividends in the future. That could enable investors in the sector to collect even more income to go along with the stock price appreciation potential these top growth stocks offer.

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Randi Zuckerberg, a former director of market development and spokeswoman for Facebook and sister to Meta Platforms CEO Mark Zuckerberg, is a member of The Motley Fool’s board of directors. Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool’s board of directors. Matt DiLallo has positions in Alphabet, Apple, BHP Group, and Meta Platforms. The Motley Fool has positions in and recommends Alphabet, Apple, Meta Platforms, Microsoft, and Nvidia. The Motley Fool recommends the following options: long January 2026 $395 calls on Microsoft and short January 2026 $405 calls on Microsoft. The Motley Fool has a disclosure policy.