U.S. Dividend Payouts Accelerated in Q2, Led By Alphabet and Meta
Dividend payouts grew at an impressive rate in the second quarter, with Magnificent 7 stocks Alphabet and Meta helping fuel the increases.
U.S. dividend payouts increased 8.6% to $161.5 billion in the April through June period with Alphabet (GOOGL) and Meta Platforms (META) making significant contributions by paying their first-ever dividends, according to a study by the Janus Henderson Global Dividend Index.
On a global scale, dividends rose 8.2% on an underlying basis to an all-time record $606.1 billion in Q2, Janus Henderson said. Underlying growth adjusts for lower one-off special dividends and other minor factors.
"More than nine in 10 companies (92%) globally raised dividends or held them steady during the quarter as one-third of sectors saw double-digit underlying growth and only three sectors saw dividends fall," the report said.
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After the strong quarter, Janus Henderson upgraded its forecast for 2024 dividends, now expecting global dividends to reach $1.74 trillion, an increase of 6.4% from 2023 on an underlying basis.
U.S. dividend payouts fueled by mega-cap media stocks
The first-ever dividend payments by Alphabet and Google contributed 3.6 percentage points to U.S. dividend growth in the quarter, which more than offset the handful of companies that reduced their dividends, such as 3M (MMM), following its spinoff of Solventum (SOLV).
"The initiation of dividends from big U.S. media-technology companies Meta and Alphabet, along with China's Alibaba (BABA) among others, is a positive signal that will boost global dividend growth by 1.1 percentage points this year," said Jane Shoemake, client portfolio manager on the global equity income team at Janus Henderson, in a statement. "These companies are following a path well-trodden by growth industries over the last couple of centuries, reaching a point of maturity where dividends are a natural route for returning surplus cash to shareholders."
Is Alphabet stock a buy, sell or hold?
Alphabet has struggled in recent months amid a broader shift way, but the communication services stock remains about 10% higher for the year to date. And Wall Street is bullish on GOOGL.
According to S&P Global Market Intelligence, the average analyst target price is $203.34, representing implied upside of over 30% to current levels. Additionally, the consensus recommendation is a Buy.
Financial services firm Truist Securities has a Buy rating and $196 price target on the Google parent.
"We remain constructive on GOOGL but believe that visibility into potential cannibalization of its search traffic and monetization of generative AI searches (expected to begin by year-end) will dictate the direction of the stock near-to-medium term," said Truist Securities analyst Youssef Squali in a September 11 note.
Wall Street says Meta Platforms stock is a Buy
Meta Platforms has had a standout year on the price charts, up nearly 50% so far. And Wall Street thinks the Facebook parent has more room to run.
According to S&P Global Market Intelligence, the average analyst target price for META stock is $571.95, representing implied upside of about 10% to current levels. Additionally, the consensus recommendation is Strong Buy.
Financial services firm Argus Research has a Buy rating on the blue chip stock, with a $600 price target.
"Meta is benefiting from a reacceleration in advertising revenue, significant margin expansion as the result of deep cost cuts, and robust cash flow," said Argus Research analyst Joseph Bonner in an August 1 note. "While investors were spooked by CEO Mark Zuckerberg's comments following the first-quarter results concerning increased spending and capex for Meta's AI systems, his comments might in fact have inoculated them against the company raising its capex guidance with its second-quarter numbers."
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