Several big-name companies have started paying dividends this year. And some stocks may have what it takes to start returning profits to investors, Wolf Research found. This year alone, some big names have announced their first dividend payments, including Salesforce and Meta Platforms. Alphabet joined the ranks of dividend-paying companies in April when it approved its first-ever dividend of 20 cents per share and $70 billion in share buybacks. While Alphabet’s move to start a dividend is welcome, the real excitement is in the prospect of increasing payouts to investors, Charlie Gaffney, managing director at Morgan Stanley Investment Management, told CNBC in April. He also manages the Eaton Vance Enhanced Equity Income fund, which holds shares in the Google parent company. “We’re excited that they started a dividend, but we’re also excited that there’s an opportunity to increase the dividend over time,” he said. That said, Wolf’s May 20 report suggests that a few more companies may be ready to start their first dividend payments. “There was a period over the last decade or so (growth-driven market, COVID) when dividend initiations were minimal, but we’ve seen an increase in announcements over the last 6-12 months,” said Chris Senyek, chief investment strategist at Wolf. The firm screened for companies with potential dividend initiations, looking for stocks with high free cash flow yields, that are currently returning capital to investors through share buybacks, and that aren’t highly leveraged. Here are some of those names: Shoe maker Skechers made Wolf’s list. Wolf’s analysis estimates the company’s shares will rise 13% in 2025, with a 3% free cash flow-to-enterprise yield in 2024. Analysts also generally like the stock, with 11 of the 14 analysts covering the stock rating it a buy or strong buy, according to LSEG. UBS said on April 15 that it sees Skechers, which it recommends buying, as “strong pricing, improving sales mix, and fixed cost leverage as tailwinds to margins.” “SKX sales are expected to grow at a CAGR of 1.5% in 2025,” the company said in a statement. …4.” [earnings before interest and taxes] Wolf also named O’Reilly Automotive as a company that could potentially start a dividend, highlighting the company’s estimated 3% free cash flow in 2024. Though the stock is up just 1.5% in 2024, it remains a favorite on the Street, with 64% of analysts covering the company rated as buy or strong buy, according to LSEG. O’Reilly was named a top pick at TD Cowen last month. “The stock looks perfectly priced, but the fundamentals and execution remain strong, and I would take a potential dip as an opportunity to buy more,” analyst Max Lakrenko said. PayPal also joined Wolf’s shortlist of stocks that could be ready to start a dividend. Wolf’s analysis estimates the company’s 2024 free cash flow yield at 7%. The company is up just 1% year to date, and 20 of the 47 analysts covering the company said they rate O’Reilly highly, according to LSEG. The company is rated as buy or strong buy, according to LSEG. But the consensus price target suggests a 22% upside from current levels.Wolf isn’t the only Wall Street investor to highlight PayPal as a potential dividend payer. Morgan Stanley named the company as a potential dividend payer earlier this month, adding it to a list of ideas that have “a net cash position and sufficient free cash flow to start self-funding the payments.” [a dividend]Other names on the list include Mattel, Fiserv and Centene.
These companies may be ready to start paying dividends, Wolf says.
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