Share repurchases on Wall Street perform the function of dividends for the Spanish stock market. Among US listed companies, the usual formula for remunerating their shareholders, if such remuneration exists, is repurchase plans, the rarity being the payment of a dividend. In fact, there are companies like Berkshire Hathaway that have never paid a dividend to their shareholders and boast of it.
The announcement of Goal that it would pay the first dividend in its history on March 26, at $0.50 per share, has been well received by the market, within a cocktail of record results and a $50 billion increase in its share repurchase plan. But what would happen if the S&P 500 firms that do not yet pay their shareholders via dividends joined this trend? Goldman Sachs considers it viable and estimates that some of the other magnificent seven that still do not pay a dividend – Apple, Microsoft and Nvidia already do so – could join this trend. Specifically, they mention Google and Amazon, the two technology companies that according to the investment bank's analysts have “foundations that historically implied a greater probability of initiating a dividend in relation to their peers.”
Goldman Sachs experts consider that only the new dividend announced by Meta, which implies a pay out (percentage of profit destined to remunerate its investors) of 10%, will raise the estimated dividend per share of the S&P 500 by 0.7% for this year, assuming that the weight of the technology company in the stock index is 2.5 %. A calculation that they extrapolate to all the large companies in the S&P 500: only in the event that Alphabet and Amazon joined Meta and also opted for a pay out of 10%, the dividend per share of the S&P 500 would increase by 1.8%.
In the middle of the S&P 500's annual results season, 56 of its members have announced an increase in their average dividend of 6%. By sector, financial institutions and industrial companies are the ones that have increased shareholder remuneration the most through this means, which has led Goldman to raise its estimate of the index's dividend per share to 6% for this year. , from the previous 4%, and to maintain an increase of 5% for the year 2025. A rebound that is justified by the improvement of the economic environment, the expectation of an upcoming lowering of interest rates throughout this year by the Federal Reserve and the rally recorded by listed companies since mid-October.
Industrial companies are the S&P 500 listed companies most committed to dividends. As a whole, the sector weighs 24.1% within the index that groups together the so-called dividend aristocrats, those listed companies that have always been paying a constant and increasing remuneration to their shareholders for 25 years. Following them are consumer goods, with a weight of 22.8% in the index, and materials (12.5%), according to data from S&P Global.
On the other hand, along with Warren Buffett's financial conglomerate, there are a good handful of members of the S&P 500 that do not distribute a dividend, such as Tesla, Advanced Micro Devices, Adobe, Salesforce, Netflix, Uber, Booking or Boeing. Goldman Sachs analysts calculate that if Alphabet, Amazon, Bershire Hathaway and Tesla were added to Meta in the coupon payment, the dividend per share of the US index would increase by 3.1% in 2024, taking into account the weight that They bring all of them together in selective.
It is true that the upcoming presidential elections in the United States may well have something to do with the future evolution of dividends among S&P 500 companies. Since 2022, a tax that levies 1% on share buyback plans in the United States has been in force. USA, with the aim of encouraging companies to promote long-term investment, infrastructure and technological innovation. Rate that the current president Joe Biden has assured that he wants to increase to 4%, which, if it occurs, would benefit the distribution of dividends.
But beyond dividends, share buybacks remain the most common formula for rewarding shareholders among American listed companies, a mechanism that has also been gaining followers among European listed companies after the outbreak of the pandemic. According to a Deutsche Bank report, buybacks have continued to increase this season on Wall Street and only in the second week of February, US listed companies announced plans to acquire their own securities for $63 billion, the largest amount in a single week since May 2023. Among them is Uber, which plans to allocate $7 billion to repurchase its securities throughout the year after achieving profits for the first time.
Follow all the information Five days in Facebook, x and Linkedinor in our newsletter Five Day Agenda
The Five Day Agenda
The most important economic quotes of the day, with the keys and context to understand their scope
To continue reading this Cinco Días article you need a Premium subscription to EL PAÍS
_
#Meta39s #dividend #opens #door #change #Amazon #Alphabet #shareholder #remuneration