Morgan Stanley says these stocks could follow Meta and Alphabet in announcing a dividend
The dividend stock club could soon get new members, according to Morgan Stanley. “Committing to a consistent dividend sends a positive signal to the market, conveys management’s confidence in the business, and opens the stock up to income oriented investors,” wrote analyst Todd Castagno, adding that a dividend “conveys a hopeful future,” while also offering a steady income and luring passive and income investors. Alphabet and Meta Platforms are among the most recent high-profile names to initiate a dividend to give back to shareholders. The search giant announced a 20-cent per share quarterly dividend in April, while Meta Platforms authorized a 50-cent per share dividend in February. The moves bring the total tally of “Magnificent Seven” stocks offering a dividend to five, along with Nvidia, Microsoft and Apple. Castagno noted that companies across market capitalization tend to outperform the market by 6.5% and 9.2%, respectively, within six months and a year following the announcement. Broken down by sector, consumer staples, energy and communication services stocks tend to outperform, while materials is the only sector that underperforms following a dividend initiation. To find some of the potential dividend-initiating candidates, Morgan Stanley looked for stocks with a market cap exceeding $35 billion, a strong net cash position and a free cash flow yield exceeding 3%. Here are some of the companies that made the list: Several popular technology companies made the list, including PayPal and Palo Alto Networks . The stocks are up 5% and 0.3%, respectively, this year. Expedia Group holds the most significant free cash flow yield of the group at 12.6%. Shares have slumped 26% this year and more than 16% in May, with the online travel company lowering its full-year guidance earlier this month due to a slowdown in Vrbo and the business-to-consumer acceleration rate. Newly public grocery delivery company Instacart also made the cut. Shares have surged nearly 58% this year and sit about 14% below their initial public offering opening price of $42 . The company marked one of the first notable IPOs last year following a roughly two-year-long technology offering drought. Lululemon Athletica , Airbnb and Regeneron also made the cut.
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