Prediction: This Will Be the First Dividend Champion from the "Magnificent Seven"

Tech giants have a well-earned reputation for paying stingy dividends. Nvidia, despite being the largest company in the world by market capitalization, pays a dividend of just $0.01 per share, amounting to a yield of just 0.02%. Meta Platforms only started paying a dividend two years ago, or a dozen years after shares went public, and now offers a 0.32% yield, while Alphabet's first-ever dividend, announced months after Meta's, now pays $0.26%. Tesla and Amazon shares still pay nothing at all.

Income isn't everything, and these stocks may continue to reward shareholders massively in the years ahead, especially considering the historic share repurchase programs that several of them have announced, which are another, and usually more tax-efficient, way to return value to shareholders.

Yet since 1960, 85% of the wealth generated by the stock market has come from reinvested dividends and compounding, according to research by Hartford Funds. For long-term investors, the opportunities from serial dividend-growers are too powerful to ignore.

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Yet there's no question that these seven companies, termed the Magnificent Seven by analyst Michael Hartnett, have led the way higher in this stock market rally driven by enthusiasm around the $15.7 trillion artificial intelligence (AI) revolution.

For investors seeking both a way to tap into the historic wave of disruption, and also to collect growing and reliable income, the only real candidates are Apple (NASDAQ: AAPL) and Microsoft (NASDAQ: MSFT). And one clearly outshines the other.

Why Microsoft will be the first Dividend Champion from the Magnificent Seven

Dividend Champions, or stocks that have grown payouts at least once a year for 25 years or longer, are battle-tested businesses. Every Dividend Champion today has raised payouts throughout the 2008-2009 financial crisis, the COVID-19 lockdowns, the collapse of the dot-com bubble and the Nasdaq Composite's subsequent 77% crash, and the wave of inflation in 2022 that reached 41-year highs.

Yet despite their dominance and even their age (Amazon, Alphabet, Microsoft, and Apple all went public decades ago), no Magnificent Seven stock has ever claimed the title. In exactly 10 years, I predict that will change. Since 2010, Microsoft has been ramping up its dividend. After a pause the year before, it raised its dividend by 23%, and hasn't looked back since. Since 2010, it's raised its dividend by 600%, and now pays shareholders $6.6 billion in dividends each quarter.

Apple, by contrast, resumed paying a dividend in 2012, after a 17-year hiatus starting in 1995. In the 14 years since, its payouts have grown from just under $0.10 per share to $0.26 per share today, a 176% increase.

Microsoft's two-year head start isn't the only reason to bet on the Seattle-based software giant. Its payout ratio of just 23.6% means it spends only that percentage of its net income to cover its current dividend, making it highly sustainable, especially in light of its 12.5% year-over-year earnings growth last quarter.

This payout ratio is actually higher than Apple's which would seem to argue for Team Cupertino. But in this case, Microsoft's slightly higher payout ratio is a reflection of management's preference to reward shareholders through income, rather than share buybacks. After all, Microsoft spent $18.4 billion on share buybacks in the 2025 fiscal year, compared to Apple's $96.7 billion (and it spent $100.4 billion on buybacks in the fiscal year before that).

The $60 billion reason Microsoft's dividend looks safe

While the Magnificent Seven stocks may seem invincible now, 10 years is an eon for markets. Further adding to the uncertainty is that management has not issued dividend guidance.

But there's another big reason to think Microsoft's dividend will keep growing. Its $60 billion share buyback program, which has already been partially carried out, could still have enough dry powder to retire perhaps 100 million shares. This would make Microsoft's dividend even safer, as the company would save $91 million per quarter on dividends for those retired shares, and free up cash for future increases.

Today, Microsoft pays a dividend yield of 0.76%, which doesn't seem enormous. The yield is low despite the dividend's 600% growth since 2010 because, as fast as it's grown, Microsoft shares have exploded 2,756% higher in that time frame.With the speed and seriousness with which management is raising payouts, this yield could become a force to be reckoned with over the next decade.

For income investors who also seek exposure to the AI revolution and the tech sector more broadly, Microsoft is a buy.

William Dahl has positions in Apple. The Motley Fool has positions in and recommends Alphabet, Amazon, Apple, Meta Platforms, Microsoft, Nvidia, and Tesla. 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.