Tech Giants Take a Bold Step: Introducing Dividends in 2024
While many well-known tech stocks are not traditionally associated with dividends, a few have recently changed that trend. Companies like Alphabet (NASDAQ: GOOGL)(NASDAQ: GOOG), Meta Platforms (NASDAQ: META), and Salesforce (NYSE: CRM) made headlines in 2024 for initiating dividends, showcasing their financial strength and commitment to shareholders.
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Alphabet: A Cautious First Step into Dividends
In late April, Alphabet announced its first-ever dividend alongside its first-quarter earnings. The company set a quarterly payout at $0.20 per share for each class of its stock, with the first payment made in mid-June.
This initial dividend, however, equates to a modest yield of 0.4%, which may not attract income-focused investors immediately. Yet, Alphabet’s real strength lies in its dominant search engine, which continues to generate substantial revenue and remains a crucial growth area in the tech sector.
The efficiency of Alphabet’s search business allows for impressive profitability, while ambitious projects like Waymo’s autonomous vehicles point to a promising future. Despite the low dividend yield, the company’s innovation and market influence make it a worthy investment.
Meta Platforms: Making Its Mark with Dividends
Meta Platforms unveiled its dividend plan at the start of February, announcing a $0.50 per share quarterly payout during its fourth-quarter earnings release. Since then, it has maintained this distribution in subsequent periods.
Meta holds a leading position with its suite of social media services, including Facebook, Instagram, and WhatsApp. These platforms are essential to everyday communication, making them highly attractive for advertisers. In the last quarter, Meta reported a revenue increase of 22% year-over-year to over $39 billion, with net income soaring by 73% to nearly $13.5 billion, resulting in a 34% net margin.
With a dividend yield of just 0.3%, Meta’s primary appeal remains in its growth potential rather than its dividend. Investors are likely more focused on the company’s robust advertising revenue and innovation than on its relatively small cash payouts.
Salesforce: The New Player in Dividend Distribution
Salesforce joined the dividend club in February, offering a $0.40 per share quarterly payout. This marks the first dividend in the company’s history.
Despite the maturation of its core customer relationship management (CRM) business, Salesforce continues to grow, aided by strategic acquisitions such as the Slack business communications app.
Though revenue from Slack only grew by 8% year-over-year recently, compared to previous growth rates of 17%, Salesforce’s outlook remains positive. The company is actively exploring AI innovations like its Agentforce chatbot product, while also looking for future acquisition opportunities. However, in terms of dividend attractiveness, Salesforce’s 0.4% yield places it on par with Alphabet and Meta but does not capture much investor interest.
Should You Consider Investing in Alphabet?
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Suzanne Frey of Alphabet and Randi Zuckerberg of Meta Platforms are on the board of The Motley Fool, which recommends these companies. Eric Volkman hasn’t invested in the stocks mentioned. The Motley Fool has a disclosure policy.
The views and opinions expressed herein are those of the author and do not necessarily reflect those of Nasdaq, Inc.
