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Within my retirement portfolio, I own a lot of stocks that pay dividends. And many of these have been great investments in recent years, propelling my savings higher.
Interested to know what my three largest dividend stock holdings are currently? The companies could surprise you.
20% returns a year
My largest dividend stock holding at present is Microsoft (NASDAQ: MSFT). Listed in the US, it’s one of the biggest technology companies in the world.
This dividend stock is ignored by a lot of UK investors. That’s a shame because it’s an absolute champion. Sure, the yield‘s low at around 0.7%. But the payout’s rising rapidly – over the last five years it’s more than doubled.
Meanwhile, over the last five years, the share price has jumped from around $215 to $520 – a gain of more than 19% a year. So when we add in the dividends, my total returns over this period have been about 20% a year!
Is the stock worth a look today? I think so.
Competition from Big Tech rivals is a risk but I see tons of potential in the long run given the company’s cloud computing prowess. Note that many analysts have price targets above $650.
New to the dividend game
My second largest dividend stock holding is currently Alphabet (NASDAQ: GOOG), the owner of Google, YouTube, and Waymo.
It only started paying dividends this year. So it’s fair to say that it’s new to the game.
For me, the dividends here – which are very small as the forecast annual yield is only about 0.3% – are very much a bonus. I bought the stock for its growth prospects and I’ve been rewarded – over the last five years it’s risen about 200% (roughly 25% a year).
Looking ahead, this company faces some uncertainty due to competition from ChatGPT. No doubt, the way we’re searching for information is changing.
With a fast-growing cloud computing division and a self-driving car unit that’s expanding globally however, I still see a lot of potential. Add in the fact that it has one of the lowest valuations in the Magnificent 7, and I think it’s worth considering as a long-term investment today.
A low yield but a 690% share price gain
If the yields on my two largest dividend stock holdings were underwhelming, wait until I reveal the yield on my third largest. The stock is artificial intelligence (AI) powerhouse Nvidia (NASDAQ: NVDA), and its yield is just 0.02%!
Obviously, that’s terrible. It’s not going to provide me with much income at all. But with this stock, my goal isn’t income – its share price gains. And here, it has really delivered.
In my Self-Invested Personal Pension (SIPP) for example, my Nvidia holding is currently showing a gain of around 690%. Given that I only bought the stock around three years ago, that’s a brilliant result.
Is the stock worth considering for a retirement portfolio today? Well, that really depends on timeframe and risk tolerance.
This stock isn’t suitable for those seeking capital preservation as it operates in a cyclical industry and it can swing around wildly at times. But for those with a long-term horizon and a higher risk tolerance, it could be worth a look on pullbacks.
In the long run, I think it’s going higher.
