Most investors classify Nvidia (NVDA 1.40%), Apple (AAPL 0.87%), and Microsoft (MSFT +0.63%) as growth stocks, and for very good reason:
- Since Nvidia was listed on the public markets in 1999, it has gained roughly 176,000%.
- Apple stock has fared even better, gaining roughly 178,000% since its initial public offering (IPO) in 1980.
- But Microsoft stock crushes both of them, delivering a whopping return of roughly 451,000% since its public listing in 1986.
Had you invested $1,000 in any of those stocks at the date of their IPO and held on, you'd be a millionaire today. And the growth hasn't stopped, because shares of Nvidia have rocketed 195% this year alone on the back of the artificial intelligence (AI) wave.
All three stocks also pay a dividend. Their yield (or annual percentage return) is relatively small, which is why they get overlooked as income producers. But that doesn't mean investors can't earn some extra money while they enjoy the fruits of these growth stories.
Below, I'll explain how you can earn $1,000 in dividend income each year by owning shares of Nvidia, Apple, and Microsoft.
NASDAQ: NVDA
Key Data Points
All three companies are supported by rock-solid fundamentals
In order to pay investors a regular dividend, companies must first generate consistent profits. Nvidia, Microsoft, and Apple tick that box thanks to their focus on innovation, which has spurred strong demand for their products and services for decades.
Nvidia has captured the spotlight in 2023 on the back of its dominant position in the market for AI data center chips. The company's H100 graphics chip is designed to accelerate the development and training of AI models, and tech companies are clamoring to get their hands on as many as they can.
In the recent fiscal 2024 second quarter (ended July 30), Nvidia's data center revenue rocketed 171% year over year. And since the AI industry is still in its infancy, that might simply be a preview of things to come.
Microsoft is possibly the most diverse technology company in the world. It has a globally recognized software business led by its Windows operating system, and it produces a line of popular personal computers and devices. The company is also home to the Xbox gaming brand and Azure, which is the world's second-largest cloud computing platform for businesses.
In 2023, however, Microsoft has aggressively pursued AI through in-house development combined with investments in leading start-ups like ChatGPT developer OpenAI.
Apple was once considered a direct competitor to Microsoft, but the two companies have diverged. While Microsoft expanded into new businesses, Apple has always remained laser-focused on consumer products.
Its iPhone is the most popular smartphone in the world, and its Mac line of computers and notebooks has set the benchmark for quality in the PC industry. Today, Apple is the largest company on the planet with a $2.8 trillion market capitalization.
In the most recent quarter, the three tech companies earned a combined $46.1 billion in net income, which leaves them with plenty of cash to pay dividends.
NASDAQ: MSFT
Key Data Points
How you can earn $1,000 a year by owning all three stocks
Income and growth don't always go hand in hand. For example, stocks that pay a high dividend yield typically won't offer explosive capital growth (banks and real estate investment trusts are good examples). On the flip side, fast-growing stocks like Nvidia, Apple, and Microsoft tend to offer much lower dividend yields.
Why? Because the tech sector moves at a faster pace than banking or real estate. Therefore, those three companies usually reinvest their excess capital back into their operations to fuel more growth, rather than returning it to shareholders. Nevertheless, below are the current dividend yields for the tech trio:
- Nvidia pays shareholders a dividend of $0.04 per share each quarter, which equates to an annual yield of 0.036%. (Yes, that's a really low yield.)
- Apple tends to increase its dividend each year, and it currently stands at $0.24 per quarter, which represents an annual yield of 0.55%.
- Microsoft also raises its dividend around once per year, and the current payout is $0.68 per quarter, which is equivalent to an annual yield of 0.82%.
It's important to remember those yields fluctuate as the stock price of each company changes. For example, Nvidia's yield is extremely low because its stock has tripled in value this year, meaning a dividend of $0.04 per share represents a smaller percentage of its stock price.
Based on current prices, if you wanted to split a sum of money equally among shares of Nvidia, Apple, and Microsoft, you would earn a blended dividend yield of 0.47%. That means you would have to deploy $213,372 to earn $1,000 in dividend income per year.
I know what you're thinking: That's a massive outlay for very little income. But remember, as I mentioned at the top, what these tech giants lack in income production, they make up for in capital growth.
Past performance isn't a good indicator of future performance, but all three stocks are supported by robust long-term fundamentals. Therefore, consider the dividend payments as a bonus on top of what could be strong capital growth from each stock in the coming years.
