Meet the "Magnificent Seven" Stock That Pays More Dividends Than Any Other S&P 500 Company. Here's Why It's a Buy Before 2026.

" Magnificent Seven" stocks -- Nvidia , Apple , Alphabet , Microsoft ( MSFT +0.40%), Amazon , Meta Platforms , and Tesla -- are known for their market-beating returns in recent years and runways for future growth. So you may be surprised to learn that Microsoft pays more dividends (in terms of total cash spent) than any other S&P 500 company -- even more than Apple, JPMorgan Chase , and high-yield behemoths like ExxonMobil , Chevron , Johnson & Johnson , and Verizon Communications . In fiscal 2025, which ended on June 30, Microsoft spent $18.42 billion on stock buybacks and $24.08 billion on dividends. In September, Microsoft announced a 10% dividend raise, marking its 16th consecutive annual increase. Despite only yielding 0.7%, here's why Microsoft is an excellent dividend-paying growth stock for long-term investors to buy now. Image source: Getty Images. Microsoft is an underrated dividend stock One of the biggest mistakes dividend investors make is overly focusing on a stock's forward dividend yield , which is the return you can expect to make from the stock's annualized dividend, divided by its current stock price. Forward dividend yield is useful, but limited. It's merely a snapshot of a dividend yield at a moment in time. It doesn't accurately reflect a stock's true passive income potential, which is more closely tied to the dividend growth rate. The best dividend-paying growth stocks are companies that consistently growth their earnings, and in turn, can justify paying a higher dividend expense. And if investors are confident that earnings can continue rising, the stock price should go up over time. There's even an elite group of companies known as Dividend Kings that have raised their payouts annually for over 50 consecutive years -- like Coca-Cola . Microsoft is the fourth most valuable company in the world and has produced monster gains for long-term investors. But it has also become a passive income powerhouse. If you had bought Microsoft 10 years ago for around $56 per share, your yield on cost would be 6.5%. Yield on cost takes the annualized dividend and divides it by the price you paid for the stock, rather than its current price, which better represents the dividend income generated based on your initial investment. The issue with forward dividend yield is that it punishes high-performing stocks and rewards underperforming stocks. Many of the highest-yielding companies in the S&P 500 are stocks that have gone down in price in recent years , rather than companies that are rapidly raising their dividends. By comparison, Microsoft has increased its dividend by over 250% over the last decade, but the stock price has gone up even more, so the yield has dropped -- overshadowing Microsoft's commitment to its dividend. What's more, Microsoft also buys back a ton of stock -- far more than it pays in stock-based compensation. Like dividends, stock buybacks are a lever companies can pull to return capital directly to shareholders. If buybacks are larger than stock-based compensation , the outstanding...

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