Not only AI, but also profits, but also buybacks plus dividends! This is what the market requires of the "Seven Sisters" of the United States.

What I saw on Wall Street

In the future, all tech giants may be required to pay dividends, otherwise they will be seen as risky and overvalued.

As the saying goes, "the greater the ability, the greater the responsibility." the AI boom has created an amazing increase in stock prices, and it has also made the American technology giants with the highest market capitalization face the more and more stringent requirements of the market.LevvvelcoincoinmasterfreespinsAI investment, corporate profits, buybacks and dividends are all indispensable.

After years of rapid growth, the technology industry is ushering in a new stage of development. Some industry leaders such as Google, Meta, Salesforce and Booking have announced quarterly cash dividends to shareholders this year.

Dividend distribution has traditionally been seen as a sign that companies have entered a period of maturity and pay attention to investor returns. It makes a lot of sense for the technology industry to start paying dividends. First of all, it conveys that these companies have gradually shifted to maximizing profitability and cash flow after pursuing large-scale expansion. High cash reserves enable them to pay dividends, buy back shares and continue to invest in research and development at the same time, achieving a full range of shareholder returns.

Second, paying dividends helps to attract value investors. Value investors pay more attention to the long-term intrinsic value and shareholder return of the company, rather than chasing high-risk skyrocketing and plummeting. By introducing dividends, tech giants are undoubtedly sending a signal to the market that they have entered an era of value investment and become more attractive targets for defensive long-term investments.

Third, analysts believe that dividends paid by these companies are expected to continue to grow because of high barriers and outstanding profitability in the technology industry, creating higher returns for long-term investors. In the future, all tech giants may be required to pay dividends, otherwise they will be seen as risky and overvalued.

Tech giants, including Amazon and Tesla, have yet to join the dividend payout. Amazon CFO Brian Olsavsky previously said on an earnings call that the current focus was on debt repayment and capital expenditure rather than shareholder returns. Tesla also said that there are no dividend plans for the foreseeable future. But if technology dividends become a common trend, Amazon and Tesla will not be left alone.

In terms of the scale of dividends, the tech giants are relatively cautious and restrained. Google and Meta, for example, have dividend yields of only 0% respectively.LevvvelcoincoinmasterfreespinsAround 0.2% and 0.5%, well below the average of 1.37% for the S & P 500. Nvidia's dividend yield is only 0.02% and has not been raised since 2018. Last year, Nvidia had operating cash flow of $28 billion, but dividends totaled less than $400m, or 4 cents per share. But last year Nvidia bought back $9.5 billion of shares.

The increase of dividend yield needs to be done gradually. Microsoft's dividend yield is currently 0.7%, but over the past 20 years, investors have earned more than 2400% from holding shares, much higher than the 1500% increase in the share price itself.

Share buybacks are still the main way tech giants pay cash to shareholders. So far this year, the "Seven Sisters" of US stocks have spent a total of $58.5 billion on share buybacks, more than five times the amount of dividends paid. These companies believe that instead of spreading large amounts of money among all shareholders, it is better to focus on buying back a small number of shares and improve earnings per share, thereby raising the overall share price level.

Risk reminder and exemption clause

There are risks in the market, so you need to be careful when investing. This article does not constitute personal investment advice, nor does it take into account the special investment objectives, financial situation or needs of individual users. Users should consider whether any comments, opinions or conclusions in this article are in line with their specific circumstances. If you invest accordingly, you will be held responsible.