Morgan Stanley predicts these stocks may follow Meta and Alphabet in declaring a dividend

Morgan Stanley recently highlighted the potential for new companies to join the dividend stock club, emphasizing the benefits of offering a consistent dividend to investors. According to analyst Todd Castagno, dividends can signal optimism for the future, attract income-oriented investors, and demonstrate confidence in the business. High-profile companies such as Alphabet and Meta Platforms have recently initiated dividends, joining the ranks of the “Magnificent Seven” stocks offering dividends. Castagno’s research suggests that companies tend to outperform the market following a dividend initiation, particularly in sectors like consumer staples, energy, and communication services.

To identify potential dividend initiators, Morgan Stanley looked for companies with a market capitalization exceeding $35 billion, a strong net cash position, and a free cash flow yield exceeding 3%. Among the companies that met these criteria were popular tech companies like PayPal and Palo Alto Networks, as well as Expedia Group, which boasts a significant free cash flow yield of 12.6%. Despite its strong fundamentals, Expedia Group has seen its shares decline this year, with the company lowering its full-year guidance due to various challenges in its business segments. Newly public grocery delivery company Instacart, as well as well-known brands like Lululemon Athletica, Airbnb, and Regeneron, also made the list of potential dividend initiators.

Investors may want to keep an eye on these companies as they consider adding dividend stocks to their portfolios. Offering a dividend can be an attractive feature for income-oriented investors seeking a steady source of income from their investments. Additionally, companies that initiate dividends may see a positive impact on their stock performance, as evidenced by Morgan Stanley’s research findings. By diversifying their portfolios with dividend-paying stocks from various sectors, investors can potentially benefit from both income generation and capital appreciation over time. As the dividend stock club potentially expands to include new members, investors have more options to consider when building a well-rounded investment portfolio.