When tech giants start to pay dividends

After years of chasing growth at all costs, tech firms are taking a page from the playbook of old-school value businesses - paying a dividend.

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Throwing off more cash than they can spend, the shift to a regular payout provides more evidence of the companies' financial strength.

Various technology companies have introduced quarterly payouts in 2024, and while the yields are small, the news sparked huge rallies in their stocks as investors took the initiations as a sign that the group can continue to deliver robust cash flows.

Alphabet recently announced a dividend of 20 US cents a share, sparking a 10 per cent gain in the shares of the Google parent. Meta Platforms in February introduced a 50-US-cent dividend, which contributed to a historic pop in the stock. Salesforce and Booking Holdings also launched dividends in 2024.

"Dividends will be table-stakes for big tech going forward," said Mr Mark long, an equity fund manager at Homestead Advisers.

"I think if you don't pay one, it will now be taken as a sign your business is more volatile." The new dividends in some cases were accompanied by sizeable buybacks, demonstrating a renewed focus on shareholder returns as artificial intelligence acts as a tailwind to growth, a combination that investors expect will continue to support share price gains.