Dividend Tech Stocks Surge; Alphabet Leads with New Payout

Key Takeaway

• Alphabet announces its first dividend at 20 cents per share, alongside a $70 billion share repurchase, boosting shares by 10%.
• Qualcomm, Oracle, and Broadcom highlighted as dividend-paying tech stocks with significant growth potential and positive analyst ratings.
• Amid Fed rate cut prospects and high-interest rates, Citi and Goldman Sachs recommend dividend-paying stocks for stable growth; tech ETFs see record inflows of $9.2 billion in 2024.

Alphabet Initiates Dividend

Alphabet, the parent company of Google, has announced its entry into the dividend-paying league with a dividend of 20 cents per share, payable on June 17 to shareholders of record as of June 10. This move was accompanied by a $70 billion share repurchase authorization. Following this announcement, which coincided with a first-quarter earnings beat, Alphabet's shares saw a 10% increase. The tech sector, particularly with upcoming earnings reports from Amazon and Apple, remains a focal point for investors. Despite recent volatility and concerns over high valuations, the S&P 500 information technology sector has experienced over an 8% increase this year.

Tech Stocks with Dividend Appeal

CNBC Pro's screening of FactSet data has identified several technology stocks that offer dividends and have growth potential. Criteria for this screening included a dividend offering, an upside to their consensus price target, and an average analyst rating of overweight or buy. Notable companies that met these criteria include Qualcomm, with a 2% dividend yield and about 15% rally this year, and Oracle, offering a 1.4% dividend yield with potential for a 20% increase. Broadcom also featured on the list with a 1.6% dividend yield and an 18% increase this year, with further growth anticipated.

Citi and Goldman Sachs on Dividend Stocks

Citi Research highlights the attractiveness of dividend-paying stocks amid potential Federal Reserve rate cuts, pointing to companies like Visa, Mastercard, and Lam Research as candidates for growth. With S&P 500 dividends expected to grow by 6.5% in 2024, the trend towards dividend-paying stocks is gaining momentum. Conversely, Goldman Sachs advises caution due to a higher-for-longer interest rate regime, recommending noncyclical sectors for stable growth. This advice comes amidst an environment of persistent inflation and slowing GDP growth, suggesting a cautious approach to stock selection.

Tech ETFs and Hedge Funds Show Confidence

Technology ETFs have seen record inflows of $9.2 billion in 2024, significantly outpacing other sectors. This surge reflects confidence in major tech companies' resilience across economic cycles, bolstered by strong earnings growth and robust balance sheets. Hedge funds have also increased their tech exposure, particularly in semiconductors, indicating optimism in the sector's fundamentals. Despite high-interest rates, the tech sector's strong financial health, as evidenced by companies like Microsoft and Alphabet beating earnings estimates, suggests a lessened sensitivity to interest rate hikes.

Street Views

• Benchmark Analyst for Qualcomm (Bullish on Qualcomm):

  "We believe Qualcomm is particularly well positioned to capitalize on the industry’s trends of shifting AI computational inferencing workloads to the very edges of the network, where the company is leveraging its strengths in wireless connectivity."

• Oppenheimer Analyst for Oracle (Neutral on Oracle):

  "The company seems to be a long-term beneficiary of secular software industry trends including generative artificial intelligence and digital transformation."

• Barclays Analyst for Broadcom (Bullish on Broadcom):

  "Ultimately we come away with a valuable second opinion on the future of AI and a greater appreciation for the company’s many ways to win."