The market believes that although the dividend yield of technology companies is still not high, their dividend payout actions mean that US technology companies are more focused on attracting long-term investors.
After years of relentless pursuit of high growth and blindly investing free cash in further research and development and expansion, US technology companies have also begun to return to traditional value investing practices. In the first quarter of this year, they have used dividend payouts to give back to shareholders, proving that their cash flow is strong and their stock prices have been further boosted.
Meanwhile, these technology companies continue to rely on stock repurchases. The market believes that although the dividend yield of technology companies is still not high, their dividend payout actions mean that US technology companies are more focused on attracting long-term investors.
(‘US technology companies begin to pay dividends (source: Xinhua News Agency image)’,)
Dividends were distributed one after another in the first quarter
In the first quarter, multiple US technology stock companies paid dividends one after another.
High cash flow and a robust balance sheet are the core reasons why large technology stocks continue to be popular on Wall Street this year. The six largest US technology companies by market value are expected to record an overall free cash flow of over $416 billion this year.
In this context, Mark Iong, a stock fund manager at investment firm Homestead Advisers, said, “Next, dividends will be a new bet for large technology companies. If a technology company refuses to pay dividends, it may be seen by investors as a sign of a volatile business outlook.”
In some cases, new dividends are accompanied by large-scale repurchases, indicating that with artificial intelligence (AI) becoming the latest driving force for the growth of technology enterprises, the monetization ability of technology enterprises has been strengthened, and investors are starting to focus not only on the “market dream rate” of technology enterprises, but also on shareholder returns.
Among the so-called “Magnificent Seven” technology stocks, only Amazon and Tesla have not yet paid dividends this year
However,
Anyway,
Still prefer repurchase
On the one hand, technology companies have also begun to pay more attention to dividend payouts, and on the other hand,
In fact, it’s not just technology stocks. According to data from Deutsche Bank, in the past 13 weeks, US listed companies have announced stock buybacks of over $383 billion, a 30% increase from the same period last year, marking the largest scale for the same period since June 2018. Binky Chadha, the chief stock strategist of the bank, said, “In the medium term, buybacks will still be the biggest driving force for the sustained rise of US stocks.”,
In large technology companies, Meta Platforms’ first quarter dividend also came with a $50 billion buyback, and Alphabet’s dividend also came with a $70 billion buyback authorization. Apple recently announced the largest repurchase in US history, with a single repurchase amount of up to $110 billion, surpassing its previous record of $100 billion in repurchase in 2018.
Steve Sosnick, Chief Strategist at Interactive Brokers LLC, said, “This is a staggering number. Apple may state that its stock is becoming a value stock that continuously returns to shareholders, not just the high momentum growth stocks that used to require continuous cash investment in research and development or expansion.”
Daniel Peris, senior portfolio manager at Federated Hermes and author of several books on dividend investment, said, “As a dividend investor, a mature listed company announcing dividends is undoubtedly a good omen. US technology companies still prefer stock repurchases, and dividend yields are not very high, but I believe these companies are developing in this direction, and this trend alone is worth paying attention to and celebrating.” However, he also added, “In the future, if technology company dividends are to have a greater practical effect, they still need to further increase dividend yields, which they have not yet achieved.”