Dividends are starting to increase, and are being added by public companies who previously didn’t pay dividends. It’s no longer uncool and a sign of a company’s growth slow-down to pay dividends. Meta (Facebook) and Alphabet (Google) have joined in. Our partners at Capital Group talk about this change.

Investors have historically balked at dividends as a sign of declining growth prospects. That was the signal that investors sent when Microsoft first announced its dividend in 2003. But Meta appears to have successfully changed that narrative. The stock went up 23% following the announcement, accruing almost $200 billion in market cap.

The distinguishing feature today is that the larger cap tech companies have buttressed balance sheets, strong earnings, reasonable valuations and what may be the beginning of an AI megacycle that will require massive amounts of capital expenditure. In this context, the introduction of dividends by both Meta and Alphabet is viewed as a sign of capital discipline and confidence in earnings sustainability.

Read more about tech foray into dividends and beyond here.

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