Growing Speculation Alphabet Could Announce First-Ever Dividend
The tech giant Alphabet (NASDAQ: GOOGL) is set to report its first-quarter earnings results after the market closes on Thursday, April 25. The anticipation surrounding this event is not just about the numbers but also about the potential strategic moves the company might unveil. Year-to-date, Alphabet’s shares have seen an 11.9% uptick, remarkably outperforming the Nasdaq 100 index’s 2.3% rise. Despite this impressive surge, Alphabet, the parent company of Google, trails behind tech behemoths like Microsoft, Apple, and NVIDIA with a market capitalization of $1.95 trillion.
The buzz ahead of Alphabet’s earnings announcement is centered around the possibility of the company declaring its first-ever dividend. This speculation finds some basis in the recent move by Meta Platforms (NASDAQ: META), which in February announced its inaugural cash dividend of $0.50 per share on its outstanding common stock. A dividend announcement from Alphabet could parallel this action, signaling a significant shift in the way the company intends to reward its shareholders.
Traditionally, Alphabet has leaned towards stock buybacks as a method of returning capital to shareholders. It is currently in the process of working through a staggering $70 billion stock buyback authorization, with $36.3 billion of that amount still pending as the year comes to a close. While the expectation is that Alphabet will continue with its share repurchase endeavors, the door is seemingly open for a dividend announcement, especially considering the company’s robust cash flows. Projections from Bloomberg anticipate Alphabet’s free cash flow to hit $83 billion in 2024.
Market analysts are expressing optimism about the potential for Alphabet to initiate a dividend. Truist analyst Youssef Squali, in a recent note to clients, stated, “Given the company’s strong balance sheet and material free cash flow generation, we believe there is a good likelihood for the company to announce a dividend, similar to what Meta announced last quarter.” Squali, who maintains a Buy rating on Alphabet, has escalated his price target on the stock from $158 to $170, in light of his expectations for solid first-quarter results.
Andrew Zamfotis, a portfolio manager at Ami Asset Management Corp., shared his thoughts with Bloomberg News on the positive reception such a move would garner. “A dividend would be well received,” Zamfotis said. “While investors are still looking for growth from these companies, today there is also value in cost discipline, and the decision to initiate a dividend suggests that management will be prudent and attempt to allocate capital in a way that balances growth and capital return.”
The anticipation surrounding Alphabet’s upcoming earnings report is palpable, with speculation about a dividend announcement adding an extra layer of intrigue. If Alphabet indeed follows in Meta’s footsteps by introducing a dividend, it could mark a pivotal moment in the company’s strategy towards shareholder value and potentially set a new precedent for capital distribution in the tech industry.
