One need only look at Meta Platforms (NASDAQ:META) to see the huge impact that paying a dividend for the first time can have on a stock price.
META rocketed 20% higher on news that the technology giant was going to pay its shareholder their first ever dividend. Along with its latest earnings print, Meta announced that it will pay a per share dividend of 50 cents beginning on March 26 of this year. Also, the company announced an expanded $50 billion share buyback program, which investors applauded.
So, which company will be next to introduce a dividend? Surprisingly, plenty of well-known companies have never issued a dividend to their stockholders. In fact, some of the most successful and profitable publicly traded companies have been stingy when it comes to rewarding shareholders with a dividend. Let’s explore three stocks that may introduce first-ever dividends in 2024.
Chipotle Mexican Grill (CMG)
Investors have been calling for Chipotle Mexican Grill (NYSE:CMG) to pay a dividend for years now.
The popular fast-casual restaurant chain has been publicly traded since 2006. It continues to exhibit explosive growth, and is profitable and cash rich. And, its stock continues to grow at a fast rate, having gained 65% in the last 12 months and 330% over the past five years.
So, why not reward shareholders with a dividend payment? After all, the company reports having $1.45 billion of cash on hand.
To date, management has pushed back on dividends, saying they prefer to plow excess cash back into the growth of the restaurant chain and to expanding menu items. CMG continueS to grow at a brisk clip. It opened 121 new restaurant locations in the fourth quarter of last year, and plans to open an additional 315 locations this year. Plus, it is constantly changing its fresh ingredients and menu items. This could be the year when Chipotle finally pays a dividend to stockholders.
Furthermore, investors and analysts continue to call on Chipotle to split its stock for the first time as the share price surpasses $2,500.
Amazon (AMZN)
E-commerce giant Amazon (NASDAQ:AMZN) could easily follow Meta Platforms lead and launch a dividend payment for the first time.
At the end of 2023, Amazon was sitting on a cash pile of $86.78 billion, up 24% from the previous year. Therefore, the company could easily put some of that cash to work by paying shareholders dividends. Even a small dividend payment would be enough to light a fuse under AMZN stock, which is up 75% in the last 12 months, including an 11% gain this year.
Still, Amazon remains highly profitable, driven in large part by its dominance in cloud computing through Amazon Web Services (AWS). The website Sure Dividend calculates that paying a dividend would be no problem for Amazon. Further, it notes that even if the company had a dividend payout ratio of 25% (typical of a similar-size technology company), the dividend of 65 cents a share per quarter would represent just a 0.40% yield. However, Amazon remains focused on growth at all costs. Yet, a dividend is certainly possible.
Berkshire Hathaway (BRK-B/BRK-A)
One of the great, universal frustrations in the investing community is that Berkshire Hathaway (NYSE:BRK-A/NYSE:BRK-B) doesn’t pay a dividend.
Despite being a large, mature, and stable blue-chip company, Berkshire has never paid its shareholders a dividend. Not even a one-time special dividend. This has gotten especially frustrating as the company’s cash pile ballooned to a record at $157.20 billion. CEO Warren Buffett maintains that he prefers to reinvest in the business.
The irony of Berkshire Hathaway not paying a dividend to shareholders is that Buffett himself is a notorious dividend collector. Nearly every stock Buffett owns in Berkshire’s massive $367.99 billion stock portfolio pays a decent dividend. Berkshire earns $768 million in dividend payments a year from its holding of Coca-Cola (NYSE:KO) stock alone. Further, Buffett publicly complained at Berkshire’s annual meeting last year about Paramount Global (NASDAQ:PARA) cutting its dividend payment.
Yet, no dividend has been forthcoming from Berkshire Hathaway. There is hope that Buffett may eventually cave to shareholder demands. Some speculate that a special dividend might be paid when the 93-year-old tycoon finally steps down as head of Berkshire Hathaway. In the meantime, shareholders will have to content themselves with the fact that BRK.B stock is up 35% in the last 12 months, including a 13% gain this year.
On the date of publication, Joel Baglole did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
