Among the list of top-tier high-quality blue-chip technology giants out there, Google parent Alphabet Inc. (NASDAQ:GOOGL) remains one of my top picks in this space for long-term growth in concert with excellent fundamentals and a durable long-term competitive advantage.
Having what I believe is one of the best risk-adjusted returns on the stock market today is one thing, but what most investors do not consider is the possibility of Alphabet paying a dividend. Let me explain.
Alphabet, like so many of its growth-hungry peers, has utilized a growth strategy tied to the recycling of cash flow into the company’s business.
This continued reinvestment into the company’s current infrastructure, including a range of profitable acquisitions, has provided investors with relatively predictable (and significant) capital appreciation over the long-term.
Paying a dividend would seem insane, given the ability of Alphabet’s management team to generate a better return on invested capital (ROIC) than investors could otherwise generate.
That said, other large technology companies that have now entered a maturity phase have begun paying a dividend, and have continued to raise said dividend in recent years- Apple Inc. (NASDAQ:AAPL) being the most notable.
Due, in part, to increasing pressure from shareholders for a dividend as well as a slowing of large growth-based acquisitions to be made, large tech companies can indeed choose to return value to shareholders via dividends. Alphabet is a company with the means to pay a significant dividend, and I anticipate we could see additional pressure for one among income-hungry investors in the years to come.
Invest wisely, my friends.
