Investors with a preference for income are in for a treat. The Magnificent Seven tech stocks, including Meta Platforms Inc., are set to pave the way for a wave of dividends in the near future. In fact, experts at Goldman Sachs Group predict that Alphabet Inc. and Amazon.com Inc. may soon follow suit, introducing their own dividends this year. This forecast is backed by the uptick in interest among investors since Meta's recent announcement of their first-ever quarterly dividend.
Goldman Sachs' team of equity analysts, led by David Kostin, has revised its forecast for the S&P 500's dividend-per-share payout to 6%, up from the previous estimate of 4%. This adjustment is driven by the consistent outperformance of leading U.S. companies, surpassing expectations during the final months of 2023. Earnings-per-share growth for S&P 500 companies is on track to reach an impressive 7% year over year, exceeding the initial estimates of 3%.
The introduction of dividends by Meta has undoubtedly surprised Wall Street, leaving investors wondering if other major players like Amazon and Alphabet will follow suit. The heightened interest in dividend-paying stocks demonstrates the appeal of stable and consistent income streams for investors. As these developments unfold, market watchers eagerly await potential announcements from fellow Magnificent Seven members, anticipating a surge in dividend activity.
Opinion: Meta's Dividend Shakes Up Wall Street, Awaits Amazon and Alphabet's Next Move
The recent revelation of Meta Platforms Inc.'s first dividend has sent shockwaves through Wall Street. With expectations on the rise, investors are now speculating whether other tech giants like Amazon and Alphabet will join the dividend trend. As the potential for a dividend surge looms large, market analysts anticipate an exciting year ahead, keeping a close eye on these industry leaders.
Goldman Sachs' team of equity analysts remain optimistic, citing the positive performance of major U.S. companies during the final quarter of 2023. With earnings-per-share growth projected to exceed expectations, the anticipation for dividends from Amazon and Alphabet grows stronger. In this rapidly evolving landscape, investors are increasingly attracted to dividend-paying stocks for their stability and income potential.
As the market eagerly awaits the next move from Meta's fellow Magnificent Seven members, the question on everyone's mind is whether these tech giants will follow in Meta's footsteps or forge their own path. The potential for dividends from Amazon and Alphabet holds immense significance for investors and industry observers alike.
Meta Shares Soar as Company Announces Dividend Increase
Meta, the popular company known for its innovative technology, experienced a significant boost in its shares, soaring 20% in just one day. The surge followed the company's recent announcement of a quarterly dividend increase to 50 cents per share, with a payment date set for March 26.
In addition to the dividend news, Meta also reported impressive earnings growth. Their net income for the period reached an outstanding $14.02 billion, translating to $5.33 per share. This is a remarkable improvement compared to the previous year's figures of $4.65 billion and $1.76 per share, respectively.
According to experts from Goldman, companies that are likely to introduce or raise dividends typically possess specific common characteristics. These include wide profit margins, stable earnings, a commitment to share buybacks, and relatively low valuations. Meta evidently meets these criteria, which has undoubtedly contributed to their decision to reward shareholders with increased dividend payouts.
While many companies on this list may continue to prioritize share buybacks as a means of returning capital to shareholders, Meta's decision to introduce a dividend demonstrates their confidence in future earnings. This move also presents an opportunity to attract a new group of investors seeking income-oriented opportunities.
Goldman's data reveals that since the beginning of 2024, 56 companies within the S&P 500 index have raised their dividends by a median of 6%. Notably, this group includes ten financial and nine industrial firms, which have been instrumental in driving the overall increase.
Interestingly, Walgreens Boots Alliance Inc. (WBA) stands as the lone S&P 500 company to have reduced its dividend this year. In a strategic move aimed at fueling business growth, they opted to cut their dividend by half.
Now read: Is Meta Now a Value Stock?
And: This Group of Stocks Keeps Pace with the Magnificent Seven—With Less Risk
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