7 Dividend Stocks Selected by Morgan Stanley

The Growing Trend of Dividend-Paying Stocks

Morgan Stanley suggests that the club of dividend-paying stocks may soon welcome new members.
Adopting a regular dividend policy not only sends a positive signal to the financial markets, but also reflects management’s confidence in the company and attracts income-oriented investors.
Analyst Todd Castagno emphasizes that a dividend “communicates a promising future,” providing a stable income and appealing to passive income-oriented investors.

High-Profile Companies Adopting Dividend Policies

Among the notable names that have recently initiated dividend policies are Alphabet and Meta Platforms.
The online search giant announced a quarterly dividend of 20 cents per share in April, while Meta Platforms authorized a dividend of 50 cents per share in February.
These moves bring the total number of stocks in the so-called “Magnificent Seven” offering a dividend to five, joining Nvidia, Microsoft, and Apple.

Performance of Dividend-Paying Companies

Companies starting to pay dividends tend to outperform the market, with a 6.5% and 9.2% outperformance within six months and a year of the announcement, respectively.
Analyzing by sector, stocks in consumer staples, energy, and communication services sectors tend to have higher returns, while the materials sector is the only one to show lower performance after initiating a dividend policy.

Potential Candidates for Dividend Initiatives

Morgan Stanley identified companies with a market capitalization exceeding $35 billion, a strong net cash position, and a free cash flow yield above 3% as potential candidates for starting dividend policies.
Among the companies meeting these criteria are PayPal, Regeneron, Airbnb, Palo Alto Networks, Lululemon Athletica, Expedia Group, and Instacart.

These include several technology companies, such as PayPal and Palo Alto Networks, with their stocks rising 5% and 0.3% respectively this year.
Expedia Group stands out with the highest yield in the group at 12.6%.
However, the company’s stock has declined 26% this year, mainly due to a downward revision of full-year forecasts following a slowdown in Vrbo activities and customer growth rate.
Instacart, the grocery delivery company, has also earned a place as a potential candidate.

The initiative to start a dividend policy can be seen as a positive signal of confidence in the company and may attract income-oriented investors.
The search for potential candidates for this initiative reflects the growing attention towards stocks offering stable returns and sound financial management.

For further insights, you can read about the financial crisis and the signals indicating a new market downturn.