3 Reasons Alphabet Is One of the Best Dividend Stocks to Own

Core Viewpoint - Alphabet has transitioned from a pure growth company to a growth-and-income company, now paying a quarterly dividend with the potential for future increases, supported by strong operating performance and cash generation [2][3]. Group 1: Dividend Growth and Cash Flow - Alphabet's quarterly dividend was increased by 5% to $0.21 per share in April 2025, reflecting confidence in long-term cash generation [5]. - In Q2 2025, Alphabet reported a revenue increase of 14% to $96.4 billion and earnings per share rose 22% to $2.31, with trailing-12-month free cash flow at approximately $66.7 billion, sufficient to cover dividends and ongoing investments [6]. Group 2: Capital Return Strategy - Alphabet combines its dividend with significant share repurchases, with an additional $70 billion authorized for buybacks in April 2025 [9]. - In Q2, the company returned $15.8 billion to shareholders, comprising about $13.3 billion in repurchases and $2.5 billion in dividends, while maintaining a strong cash position of $95.1 billion [9]. Group 3: Growth Engines - Google Services revenue grew 12% to $82.5 billion in Q2, driven by gains in Search and YouTube, while Google Cloud revenue surged 32% to $13.6 billion, with operating income rising to $2.8 billion [10]. - The expansion of Alphabet's Cloud business enhances its overall capacity for cash returns, complementing its established services business [10]. Group 4: Future Outlook - Despite some pressures on cash flows and potential impacts on margins due to heavy AI infrastructure investments, Alphabet's diverse and profitable business segments provide multiple avenues for earnings and cash flow growth [12]. - The current dividend payout is conservative, supported by strong free cash flow and a low payout ratio, with a clear path for future increases as profits compound [13].