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Doing Your Holiday Shopping? These Stocks Might Make Great Gifts

Stock market Christmas gifts

It's that time of year when people are doing their holiday shopping and making their gift list — and checking it twice. Whether you're a parent planning gifts for your children of any age, including adult children, or you're thinking about gift ideas for other family members, friends or anyone else, you may be thinking about giving money or gift cards.

However, no matter which holiday you're planning gifts for, whether it's Christmas, Hanukkah, Kwanzaa, a birthday, or some other occasion, there may be one great gift idea you haven't thought of yet. Stocks, bonds and other securities are gifts that could keep on giving for a long time after the occasion on which you gave them. 

In fact, a new poll released just the other day found that 68% of Americans would be happy to receive an investment as a holiday gift, while only 6% said they would be disappointed to receive an investment. It’s easy to see why most Americans would love to receive an investment as a gift, although children might need a little convincing.

Why stocks can make great gifts

No matter how young (or old) your child is, gifting them stocks is a great way to teach them about investing and the magic of compounding, which is essentially just the interest earned on top of interest. In fact, Warren Buffett has often credited compounding as an essential driver of how much wealth he has built over the years.

He actually bought his first stock at age 11, so he's been compounding his wealth for over 80 years now. While the average American might not come anywhere near Buffett's net worth of $120.6 billion, teaching your kids the benefits of compounding as they pertain to stock-market investing will go a long way toward helping establish their future.

Additionally, everyone you give stocks to will benefit as the price rises over time, which would normally be expected over the long term if you've purchased blue-chip names. As a result, the recipient will see their savings grow at a much faster rate than if the money had been placed in a savings account. 

In an email, Michael Kim, senior financial analyst at Zacks Small Cap Research, pointed out other great benefits of giving stocks.

“Gifting stocks can be a great way to help recipients diversify their financial asset portfolios and build wealth over time, not to mention limiting capital gains taxes for donors if gifting shares held at a profit,” he said.

Kim also advises givers to consider the recipient’s age, income level, investment profile and financial objectives when picking stocks to give, if possible. He also recommends that givers help recipients understand the potential tax liabilities down the road and the risks associated with owning stocks, like volatility.

Of course, even a volatile stock price can teach kids or others who haven’t invested much yet a lot about investing, saving, the markets, and most other areas of finance. Thus, here are some stocks that could make great gifts, depending on whom you plan to give them to.

Stocks for kids

First, let’s start with kids, who might not see the value of the gift immediately. Giving a child shares of a company whose brand or products they know and love is an excellent way to teach them about business. After all, each share they own gives them a tiny piece of the company and all the responsibilities that go along with that, like voting on what happens to the company.

For example, some names that might appeal to some kids include:

Blue-chip stocks and other well-known names

Whether you’re buying for kids or anyone else, blue-chip names can make great gifts. Here are some suggested options with high brand-name recognition:

ESG or impact stocks

For adults or anyone who wants to support various causes or reward companies for certain behaviors, impact stocks or those with attractive ESG (environmental, social and governance) characteristics can make great gifts. Here are some suggestions.

For example, in addition to Tesla (mentioned above), there are also many other environmentally friendly names, including: 

  • Beyond Meat (BYND)
  • Blink Charging (BLNK)
  • ChargePoint (CHPT)
  • Enphase Energy (ENPH)
  • First Solar (FSLR)
  • Ideal Power (IPWR)
  • NextEra Energy (NEE)
  • SolarEdge Technologies (SEDG)
  • Unilever (UL)

Alternatively, some investors may want to support biotech firms working on treatments for serious illnesses that have impacted them or their loved ones in significant ways. While the list of companies working on hard-to-treat diseases is virtually endless, some suggestions include:

  • AbbVie (ABBV)
  • Annovis Bio (ANVS)
  • Biogen (BIIB)
  • Coya Therapeutics (COYA)
  • Eli Lilly (LLY)
  • NRx Pharmaceuticals (NRXP
  • Ventyx Biosciences (VTYX)

Dividend stocks

Finally, dividend stocks can also make great gifts because in addition to price appreciation, they also represent a small income-generation stream that should go beyond the one-time gift. Here are some stocks with attractive dividend yields:

  • AT&T (T)
  • Comcast (CMCSA)
  • General Mills (GIS)
  • Home Depot (HD)
  • Johnson & Johnson (JNJ)
  • Lowe’s (LOW)
  • Starbucks (SBUX)
  • United Parcel Service (UPS)
  • Verizon (VZ)

Gifting dividend stocks like those above or even well-known tech names like Microsoft, which pays dividends but isn’t typically owned just because of its steady dividend payments, is also a strategic move that fosters generational wealth and enhances financial literacy. In an email, Jay Pollack, CEO of Covert Concepts, noted that such companies are not only popular among younger generations but also stand as blue-chip, high-dividend-yielding stocks. 

“This combination offers the unique advantage of providing a consistent income stream through dividends, without necessitating a sale,” Pollack explained. “By choosing such familiar and robust stocks, you're not only investing in their financial future but also engaging them in the world of investing, teaching valuable lessons in wealth accumulation and the importance of earning through dividends."

Tax implications for gifting stocks

Of course, if you plan to give stocks or other securities as gifts, there are some important things to be aware of, especially when it comes to taxes. Here's what else you need to know if you're considering giving stocks as gifts.

The first is the gift tax, although this will impact very few as long as you play by the rules. As of 2023, you can give up to $17,000 to any one person per year without having it count toward your lifetime gift tax exclusion of $12.92 million (as of 2023). 

If you give anyone more than $17,000 in a year, you'll need to file a tax form disclosing it and applying it to your lifetime gift exemption of $12.92 million (as of 2023) instead of paying the gift tax. Importantly, the gift tax and limits do not apply to your spouse if they are a U.S. citizen or your dependent children.

Aside from the gift tax, you'll also need to consider the implications of capital gains taxes. You won't pay any capital gains taxes when you give stock as a gift. However, if or when they sell the stock, the person you give it to could owe capital gains taxes on the amount it has gained in value since you purchased it (not since when you gave it to them), depending on their tax rate and whether the stock was held for more than a year. 

For this reason, it may be less confusing to purchase stock specifically for the purpose of gifting it rather than giving someone stock you’ve owned for many years.

Finally, there’s the so-called "kiddie tax," which applies to dependent children who are either younger than 19 or are full-time students between the ages of 19 and 23. The tax is applied to unearned income, which includes capital gains, dividends, and income from a few other sources. 

There is no tax on the first $1,250 (as of 2023) of a child's unearned income in a tax year, while the second $1,250 in unearned income is taxed at the child's tax rate. However, everything above $2,500 is taxed at the marginal tax rate of the child's parents. One exception is for a child with earned income that amounts to more than half the cost of their support.

Consider all the factors for going ahead

As you can see, there are many factors to consider whenever you make a sizable monetary gift. Thus, it may be a good idea to speak with a financial advisor before making any such moves to ensure that you follow all the necessary tax requirements and other rules governing such large gifts.


Ari Zoldan is CEO Of Quantum Media Group, LLC. Ideal Power, NRx Pharmaceuticals and Coya Therapeutics are clients of Quantum Media Group.

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