Alphabet's First Dividend: What You Need to Know

The news that accompanied the latest earnings release pleased investors, but the yield on Alphabet stock will be modest.

David Harrell 1 May, 2024 | 4:28AM
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Meta Platforms (META) made headlines in early February with the unexpected announcement that it was initiating a regular quarterly dividend. Now Alphabet (GOOG), in conjunction with its first-quarter earnings release on April 25, said it is initiating a quarterly dividend for all its share classes. Shareholders on record as of June 10 will be paid a dividend of US$0.20 per share on June 17.

Key Morningstar Metrics for Alphabet

• Fair Value Estimate: US$179.00
• Morningstar Rating: 3 stars
• Morningstar Economic Moat Rating: Wide
• Fair Value Uncertainty: High

Alphabet shares will yield approximately 0.5%, in line with Meta’s current yield, and pay out US$0.20 per share.

What Will Be the Alphabet Dividend Yield?

To quote baseball great Yogi Berra, it’s déjà vu all over again. As with Meta, a mega-cap growth firm that has returned cash to shareholders via share repurchases will now return cash via a regular dividend as well. But the initial yield will be modest.

At current share prices, Alphabet shares will yield approximately 0.5%, in line with Meta’s current yield. This is far less than Alphabet’s buyback yield, which has averaged 2.4% a year over the past five years. The new annual dividend rate of US$0.80 will total around US$10 billion annually, while Alphabet also authorised US$70 billion of share repurchases. It thus seems likely that repurchases will outweigh dividends in the near term.

However, based on Morningstar equity analysts’ earnings forecast for the full year, the new dividend rate represents just 12% of earnings per share. Alphabet’s management would have substantial room for future dividend increases if it allocates additional capital to the dividend.

With Alphabet’s move, eight of the 10 largest U.S. companies by market capitalisation now pay a quarterly dividend. The best-yielding stock in this group is Broadcom (AVGO), which yields 1.6%. Meanwhile, Nvidia’s (NVDA) dividend remains minuscule, yielding just 0.02%. Amazon.com (AMZN) and Berkshire Hathaway (BRK.B) are the cohort’s only non-dividend-paying stocks.

 

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Securities Mentioned in Article

Security NamePriceChange (%)Morningstar Rating
Alphabet Inc Class A177.24 USD0.25Rating
Berkshire Hathaway Inc Class B407.32 USD0.44Rating
Broadcom Inc1,828.87 USD5.41Rating
Meta Platforms Inc Class A506.63 USD0.49Rating
NVIDIA Corp130.98 USD-0.68Rating

About Author

David Harrell  David Harrell is the editor of ClearFuture.

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