Tech Giants Alphabet And Meta Pay Dividends Now - But Are They Worth It?

Tech behemoths are known for their stellar growth potential, which results in significant capital gains. However, they are typically not popular with investors seeking dividend payouts for steady passive income. 

Nonetheless, in a significant move reflecting a shift in strategy and a maturing stage of growth, both Meta Platforms META and Alphabet, Inc. GOOG have announced plans to pay dividends to their shareholders alongside massive share buyback programs. 

Stellar Earnings and First Dividend Payouts 

Meta Platforms, formerly Facebook, took the market by storm with its announcement of a quarterly dividend payment of $0.20 per share for the first time in its history back in February. The social media giant also revealed an expanded $50 billion share buyback program. 

This decision came as Meta reported financials for the last quarter of 2023 exceeded expectations. Revenues amounted to $40.1 billion, surpassing the Wall Street estimate of $39.18 billion. Furthermore, the company's bottom line came in at $5.33, beating the consensus estimate of $4.96. 

"Introducing a dividend just gives us a more balanced capital return program and some added flexibility in how we return capital in the future," said Susan Li, Meta Platforms CFO. 

Similarly, Alphabet, Google’s parent company, unveiled its plans to pay its first-ever dividend of $0.20 per share last month, alongside a massive $70 billion share buyback program. This decision followed Alphabet’s impressive first-quarter results, which surpassed analysts’ expectations. 

Alphabet's total revenues amounted to $80.54 billion in the fiscal first quarter of 2024, marking the fastest growth since 2022. EPS came in at $1.89, surpassing the consensus analyst estimate of $1.89. 

Dividends signify a shift in the companies’ approach, from solely focusing on growth to also prioritizing returning value to shareholders.

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Meta's Slowing Growth Projection 

Meta Platforms announced its first-quarter earnings results during the last week of April.  However, the market reception of the tech giant's stellar growth was underwhelming. The company's revenues grew 27% year-over-year to $28.65 billion, marking the fastest quarterly growth since 2021. 

Meta's projected sales for the second quarter range between $36.5 billion and $39 billion. The midpoint of this range, at $37.75 billion, reflects an 18% year-over-year growth rate, falling short of analysts’ average prediction of $38.3 billion.

During the earnings call, Meta Platforms CEO Mark Zuckerberg highlighted initiatives such as advancements in glasses and mixed reality, areas where the company currently lacks profitability. He also emphasized the escalating investments in artificial intelligence. However, this resulted in a steep sell-off, as META stock fell by 16% intraday on April 24. 

For years, investors have been drawn to tech stocks like Meta and Alphabet for their growth potential. While dividends offer a steady income stream, they may not match the exponential growth that these companies have historically provided. Moreover, the tech stalwarts don't have a steady history of paying dividends, which might deter investors who seek reliable quarterly dividend payouts.

Capturing Growth and Income

While Meta and Alphabet’s decision to pay dividends is a significant shift in their strategies, it’s important to note that these payouts are unlikely to amount to substantial returns in the form of income for investors. Meta’s forward dividend yield currently stands at a mere 0.11%, while Alphabet’s is only slightly higher at 0.12%. These low yields indicate that both companies are still very much focused on growth rather than providing meaningful income to shareholders.

For investors who want to capture the growth potential of Meta and Alphabet while also generating steady income, diversifying their portfolios with real estate investments could be an attractive option.

Real estate has historically been one of the most reliable sources of income for investors but is traditionally far from a passive investment when you consider all of the management responsibilities involved. However, a company backed by Amazon.com Inc founder Jeff Bezos has created a real estate investment platform that allows retail investors to buy shares of carefully selected rental properties. The best part is you can invest with as little as $100.

Arrived takes on all of the landlord responsibilities while investors simply collect monthly dividends from the rental income while the properties appreciate in value over time. The platform has already funded over 370 properties and has paid out more than $5.6 million in dividends. The process to sign up and become a partner in a single-family rental only takes about 10 minutes.

Click here to view properties currently available on Arrived.

Diversifying with private market real estate can help investors balance their portfolios, combining the growth potential of tech giants like Meta and Alphabet with the stability and income-generating capabilities of rental properties. This approach can provide a more well-rounded investment strategy, catering to both long-term growth and steady income generation.

Want to explore more private market real estate options? Browse current investment opportunities that match your criteria on Benzinga’s Real Estate Offering Screener