The Motley Fool·2025-03-28 11:00Core Viewpoint - Alphabet is emerging as a promising dividend growth stock, leveraging its strong cash flow and growth in AI to increase its dividend per share over the long term [1][2]. Group 1: Dividend Growth Potential - Alphabet has initiated a small dividend yielding 0.47%, with significant potential for growth as it capitalizes on advancements in AI [2][6]. - The company’s free cash flow per share is currently $5.70, with only 14% allocated to its annualized dividend of $0.80, indicating a substantial runway for future dividend increases [8]. Group 2: Revenue Growth and AI Impact - Alphabet's revenue from Google Search is growing at a double-digit rate, with a year-over-year growth of 12.5% last quarter, aided by AI features [3]. - The Google Cloud division is experiencing a 30% year-over-year revenue growth, reaching $12 billion last quarter, contributing to its profitability with over $2 billion in operating income [4]. Group 3: Earnings and Share Repurchase Strategy - Operating income reached a record $112 billion in 2024, with consistent earnings growth expected to support dividend payouts [5]. - The company has reduced its shares outstanding by 11% over the last five years, enhancing its ability to increase dividend per share [7]. Group 4: Competitive Advantages - Alphabet benefits from diversified revenue streams across Google Search, YouTube, and Google Cloud, which mitigates risks associated with any single segment [9]. - The YouTube platform exhibits a network effect, while Google Search maintains a distribution advantage, and Google Cloud is positioned to achieve economies of scale [10]. Group 5: Long-term Outlook - The company is anticipated to experience steady earnings growth, which will support its dividend payouts and position it as a leading dividend growth stock in the coming decades [11].