Magnificent Seven? Tired.
Dividend Six? Wired.
Plain vanilla investors fawn over chipmakers and AI stocks. They hope they can buy them high, and sell them higher.
Contrarian income investors like us? We focus on the companies that support the AI hype. The pick and shovel providers. A Dividend Six that plays on AI and pays $26,000 to $41,500 in dividends alone on a $500K stake.
With that well say move over, Magnificent Sevena term coined by Bank of Americas Michael Hartnett (and inspired by the classic Sturges Western) to describe the markets predominant tech names.
Those stocks? Microsoft (MSFT), Apple (AAPL), Facebook parent Meta Platforms (META), Amazon.com (AMZN), Google parent Alphabet (GOOGL), Nvidia (NVDA) and Tesla (TSLA).
Lately, though, the Magnificent 7 has become a bit too popular. Check out Google Trends, a real-time measure of vanilla excitement:
More and More, People Are Searching for the Magnificent 7
Source: Google Trends
Another problem with these popular blue chips? Most of them dont pay.
Blue-chip they might be, but you can forget about income. Three dont pay a penny in dividends, and four that do offer up the meagerest of yields.
Enter the Dividend Six, a six-pack of underappreciated tech stocks that yield 5.2% to 8.3%. Thats no typo.
Worthy of a spot in our retirement refrigerator? Lets split the six apart to have a look.
Xerox (XRX)
Dividend Yield: 5.2%
At a 5%-plus yield, Xerox (XRX) delivers nearly 7x the yield you can expect from the tech sectoran extraordinarily irregular amount of income for what is a notoriously chintzy group of stocks.
But are you getting any growth?
On its face, Xerox doesnt look great. While its trying to pivot to digital document services, its a printer company at its core. And printers have simply been vanishing, both as digital technologies have supplanted paper documents, and as many white-collar businesses have partially or completely exited physical office space. Perhaps no other business has lost more to those three little letters: WFH.
The investment case is more cloudy than youd expect, though.
Xerox is laser-focused on both cutting costs and optimizing free cash flow, much of which it wants to continue directing toward investors through its quarterly dividend. And from a profitability standpoint, theres a lot of sunlightthe bottom line is expected to improve by about 15%-16% both this year and next. Moreover, XRX shares are dirt-cheap, trading at just 6 times next years earnings estimates.
But actual growth remains evasive. The companys most recent quarter saw total sales dip 9%, largely because of a hemorrhaging in equipment sales (-17%). While XRX might be pivoting to software, that pivot needs a pushsome 80% of revenues still are generated by the print business.
Its also hard to get excited about the dividend, which, while certainly well above-average, has stagnated and is losing ground to inflation every year.
No Life in the Dividend, No Life in Shares
Opera (OPRA)
Dividend Yield: 7.1%
Growth hasnt been an issue for Opera (OPRA)a Norwegian browser provider whose primary products include the Opera line of mobile browsers, Opera News, Apex Football, and Opera Ads (an online advertising platform). It also owns 2D gaming development platform GameMaker Studio. You might not be familiar with it, but its better-known around the worldit operates in England, France, Germany, Ireland, Nigeria, and Spain, among other countries.
Browsers and search portals have quickly become popular venues for consumer-facing AI applications. Like Microsoft (MSFT) and Alphabets (GOOGL) Google here in the States, Opera is implementing AI functions into its browsers and other software. Right now, both Aria (Operas browser AI) and ChatGPT are fully integrated with Opera browsers, reaching customers in more than 180 countries.
While Opera has been around since 1995, its a relatively recent tech IPO, going public in 2018. Growth has been red-hot so farthe companys most recent annual revenues improved 33% year-over-year, and it boasts nine consecutive quarters of 20%-plus top-line expansion. And current-year profits are set to explode by 244%! Of particular note right now is a change in European Commission requirements that will force Apple to allow users to choose from multiple default browserssomething that could provide a tailwind of new iOS users for Opera, which monetize better than Android users.
Operas Business Has Caught Fire
However, Opera isnt funneling all of these larger profits back into the businessin June, it announced a generous new 40-cent-per-share semiannual dividend that translates into a 7%-plus yield. Like with many fresh dividend programs, Opera might face questions about how long it can keep up its incredible growth rampindeed, 2024s top- and bottom-line estimates are much more subdued. Still, this lesser-known tech play is worth keeping an eye on.
Operas dividend brings up a tradeoff you have to make with most (but not all) current high-paying tech stocks: Theyre largely based overseas, which means that while they pay a lot, the payouts tend to be less frequentand the payouts themselves can be variable based on profits, which could be problematic as you try to set up an income calendar.
Consider this quartet of high-yielding Taiwanese chip stocks:
Give Me 4 Minutes, Ill 5X Your Retirement Income
If youre a younger investor with plenty of horizon to spare, those dividend schedules are no big dealjust enjoy whatever growth you get and reinvest those occasional bursts of cash.
But if youre picking retirement holdings, you need to have it all.
Big yields? Yes.
Growth potential? Absolutely.
A bargain price? A must.
Protection from the Fed, elections, and global disarray? You betcha.
And while were at it, more frequent (and more consistent) payouts.
If all that sounds like too much to ask, believe me, its not. Because those are exactly the kind of investments you can find right now in my Perfect Income portfolio.
My Perfect Income portfolio attacks retirement investing from a different angle. Rather than trying to time the market and chase trends, we target high-yield holdings (roughly 5x the S&P!) that walk their own path, no matter what the Fed, Congress or the rest of the world throws their way.
So, what makes these dividends perfect? Well, they have to have a few things in common:
Let me show you the stocks and funds you need to stabilize your retirement. But more importantly, let me teach you more about this incredible strategy itself and make you a better investor in the process!
Take control of your financial legacy today. Click here for my newly updated briefing on the Perfect Income Portfolio!