Some investors favor growth, buying up shares of the fastest-growing companies with the idea that their share prices could also roar higher. Other investors prefer dividend stocks because they can count on these steady players to offer passive income every year. Both investment strategies could bring you great rewards over the long term, so you may need to struggle to choose between them.
But here's the good news. You don't have to. Many companies offer a blend of growth and dividend payments, giving you the best of both worlds. In fact, you can even find dividends these days among some of the highest-growth technology stocks, including the "Magnificent Seven." Named after the 1960 Western, these companies are leaders in their industries and have driven the S&P 500 and the Nasdaq higher in recent times.
Let's check out two that make particularly interesting earnings-growth plus passive-income buys right now.
Image source: Getty Images.
Meta
Meta Platforms (META -4.42%) is best known for its social media empire, including Facebook, Messenger, Instagram, and WhatsApp. This range of apps allows the company to reach users across age groups and offers something for everyone -- from those who want to connect with faraway family and friends to those aiming to share their favorite photos with the world.
Meta's got everyone covered and holds the first-to-market advantage, which offers the company a significant moat, meaning it will be very difficult for rivals to threaten the company's dominance. This is key because Meta gets nearly all of its revenue from advertising across its family of apps -- about 97% of last year's total revenue.
And this market leadership has helped Meta's earnings soar into the billions of dollars over the past decade.
This brings me to the subject of dividends. The company, thanks to this growth, recently decided to launch a dividend for the very first time. Meta has returned capital to investors in the past through share repurchases and plans to continue that, but now, a dividend has entered the mix: Meta pays $2 a share annually, representing a dividend yield of 0.4%.
"Our strong financial position and performance will enable us to invest in the business while also continuing to return capital to investors over time," Chief Financial Officer Susan Li said in the recent earnings call.
Today, Meta shares trade for 25 times forward-earnings estimates, a reasonable price to pay for a company with a solid competitive advantage that should keep growth going. The new dividend payment is icing on the cake.
Apple
Apple (AAPL 1.18%) dominates the smartphone market, with its iPhone taking the top spot worldwide last year, according to IDC. This and other products such as the Mac and iPad have helped the company grow its number of users. Today, Apple has more than 2.2 billion active devices installed globally.
The company has grown earnings over the years thanks to these popular products and continues to do so for two reasons: First, Apple's brand strength means current users keep coming back, and this brand strength has helped the company win over new users too. In the recent quarter, Apple reported a record number of iPhone upgrades, and about half of Mac and iPad buyers were new to those particular products.
A second reason for Apple's earnings growth is this enormous installed base. Apple can generate significant services revenue too, offering digital content, cloud services, and more. In recent quarters, services revenue has climbed to record levels.
All of this means, you can count on future growth from Apple through both its sales of devices and subscription fees from its services.
As for the dividend, Apple has been issuing these payments every year since 2012, suggesting that rewarding shareholders is a priority for the company. Apple pays an annual dividend of 96 cents a share, representing a yield of 0.53%. With free cash flow of more than $106 billion, the company has what it takes financially to keep the payments going.
Apple shares trade for 27 times forward-earnings estimates and, like Meta, make a fantastic buy at this level for a company offering you the key elements of growth and passive income.
Consider your priorities
Finally, one more important thing to note. Other stocks out there -- and these generally are stocks with slower growth rates -- offer you higher dividend payments or potential for greater dividend increases. If passive income is your priority, they might be a better fit for you.
Meta and Apple won't match the passive-income payment levels of those stocks because these tech players are heavily investing in their businesses to ensure significant earnings growth moving forward. And this makes them the perfect choice for investors looking for earnings potential -- with the bonus of a bit of passive income every year.
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. Adria Cimino has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Apple and Meta Platforms. The Motley Fool has a disclosure policy.
