Increased dividends from renowned companies are drawing the attention of investors eager for enhanced long-term returns. In 2024, several tech titans, including Meta Platforms, Alphabet, and Salesforce, made headlines by initiating modest dividend payments, marking a significant shift in corporate strategy. Although initial yields remain under 1%, Meta, known as Facebook’s parent company, announced a 5% dividend increase in February to around 53 cents per share, signaling confidence in its long-term financial health.
Dividends present long-term shareholders with an avenue to reinvest payouts, allowing the benefits of compounding returns to work in their favor. Morgan Stanley recently spotlighted companies poised to begin such distributions, based on criteria including a net cash position exceeding 5% of their market capitalization and a free cash flow yield over 3%. “With the goal of generating new ideas and capturing additional alpha, we’ve identified companies that should have the ability to pay a dividend and potentially earn outsized returns,” noted strategist Todd Castagno in a March 6 report.
Among the promising candidates is Molina Healthcare. The managed care provider’s stock has risen by 8% in 2025, outpacing the S&P 500’s nearly 5% decline. With a free cash flow yield of 10.9%, Molina has caught investors’ eyes. While the company faces uncertainty due to potential Medicaid spending cuts by Republican lawmakers, analysts from Wells Fargo upgraded Molina to ‘overweight’ from ‘equal weight,’ raising the price target to $372 from $295. Analyst Stephen Baxter reported that drastic Medicaid cuts might not be politically feasible, with any changes likely manageable for healthcare organizations.
Another contender is Twilio, a cloud communications company, which despite an 8% decline in its share price in 2025, maintains a free cash flow yield of 4.7%. Analysts are generally upbeat about Twilio’s prospects, with 18 out of 30 analysts rating it as a ‘buy’ or ‘strong buy’. Morgan Stanley’s Meta Marshall upgraded Twilio’s rating to ‘overweight,’ setting a new 12-month price target of $160, up from $144. She highlighted the recent sell-off as “overdone” and described it as a buying opportunity, citing potential for growth in artificial intelligence and cross-channel selling.
Identity management firm Okta is also on Morgan Stanley’s radar, witnessing a robust 43% increase in its share price in 2025, supported by a free cash flow yield of 5.4%. Okta exceeded Wall Street expectations with its recent quarterly revenue and earnings, providing optimistic future guidance. Morgan Stanley analyst Keith Weiss shared a positive outlook, anticipating growth acceleration over the coming quarters as operational strategies are refined. The analyst consensus is mostly positive, with 23 out of 41 analysts recommending a ‘buy.’
Morgan Stanley’s list of potential dividend initiators encompasses other notable names including Deckers Outdoor, Veeva Systems, Arista Networks, and UiPath. As these companies explore dividend strategies, investors keen on compounding returns will watch closely to capitalize on these developments.
This evolving landscape underscores the strategic shifts within industries as companies balance between reinvesting in growth and returning profits to shareholders. As such, investors are advised to monitor these companies that show promise not just in growth potential but also in shareholder value enhancement through dividends.
Original Source: https://www.cnbc.com/2025/03/18/these-stocks-are-contenders-to-start-dividends-morgan-stanley-says.html
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Publish Date: 2025-03-19 00:50:00
