Investors cheered Alphabet ‘s recent dividend announcement, but the best rewards are still to come for those who purchase the stock and hold onto it. Shares of the Google parent saw a 10% pop on Friday after the company posted first-quarter results that surpassed analysts’ expectations. Alphabet also announced $70 billion in share buybacks and its first-ever dividend of 20 cents a share , payable in June. The tech giant is in good company: Facebook parent Meta Platforms announced a 50-cent per share payout earlier this year, while Salesforce authorized a dividend of 40 cents per share . Though these dividend yields are modest – with Alphabet paying a 0.5% yield versus the S & P 500’s yield of roughly 1.3% – the income and the growth prospects carry plenty of promise for the investors who buy and stick around. “Alphabet validated our investment approach to some degree,” said Charlie Gaffney, managing director at Morgan Stanley Investment Management and portfolio manager of the Eaton Vance Dividend Builder Fund (EIUTX) . The Google parent is among the fund’s holdings. “They generate an awful lot of free cash, and we feel good about what the business looks like,” he said. “We are excited that they initiated, but we’re also excited about the opportunity to grow the dividend over time. … I find it highly unlikely they just hold the dividend at this level.” Not just runaway stock appreciation It’s easy to get starstruck by price appreciation in the Big Tech names, with Alphabet up more than 17% in 2024 and Meta jumping nearly 22% in the period. However, when you buy and hold these names, and then you reinvest the dividends, you get an enormous bang for your buck. Consider International Business Machines , which recently beat on quarterly earnings but not revenue. Shares are up by less than 2% year to date, and the stock currently offers a 4% dividend yield. The longer-term story is that if you bought $1,000 of the stock in 2003, and then you reinvested the dividend by purchasing more shares, your holding would have been worth $3,280.95 by the end of 2023. That reflects a return of 228.1%. Had you spent down the income, your holding would’ve seen a jump of about 85% over that 20-year period. Other names that offer investors that combination of income and growth prospects include semiconductor company Qualcomm and Broadcom , offering yields of 2% and 1.6%, respectively. Looking for the next dividend payer When scanning the universe for dividend payers,…
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