What New Big Tech Dividends Mean for Dividend Investing
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In this week's newsletter:
It’s been a while since I’ve broken out my Wall Street lingo phrase book, but this week I’m dusting it off, thanks to what could be called a “relief rally” following the latest reading on inflation.
The perceived buy signal came in the form of a slightly weaker-than-expected Consumer Price Index report for April. Was the CPI report really that good? Probably not. What we likely saw was relief that for the first time in months, the CPI wasn’t worse than expected, and in the words of Morningstar’s chief US economist Preston Caldwell, “stops the bleeding” when it comes to pushing back expectations for Fed rate cuts. You can find our complete look at the CPI report, and Caldwell’s take on it, here.
With inflation back in focus, the question once again builds for investors around how best to allow for high inflation in a portfolio. We’ve updated our look at best investments for when inflation is running hot. That includes I bonds, funds and gold.
In the background, one of the key reasons that inflation has remained sticky is the underlying strength of the economy, and especially the jobs market. With traders so focused on monthly reports, it’s easy to miss the forest for the trees. And one of the really important high-level trends has been the role that increased immigration has played in robust job growth. In this weekend’s must-read, Sarah Hansen digs into the impact that immigration has on economic growth and inflation.
Meanwhile, yet another earnings season is drawing to a close. But before we say it’s a wrap, we still have the market’s big kahuna set to report this coming Wednesday: Nvidia. To get ready, we take a look at what Morningstar analyst Brian Colello will be watching when Nvidia comes out with its quarterly report.
One of the surprises this earnings season came with the Alphabet’s announcement that it would begin paying dividends. This followed news earlier this year that Meta Platforms would start returning cash to shareholders through dividends. As Big Tech companies enter the ranks of income-paying stocks, they join a growing number of tech companies more broadly that offer dividends, and in the process, they’re changing the complexion of dividend growth strategies. In this great read, Bella Albrecht looks under the hood of this trend and what it means for dividend growth investing.
Before we close out this week’s newsletter, I want to spend a few words on Morningstar’s big 40th anniversary. My own experience with Morningstar goes back some 25 years, first as an outside reporter and, for the last nine, as an employee. I saw firsthand even before joining that Morningstar was not your typical financial services company. I highly recommend checking out this column on “Morningstar’s Why” from Don Phillips, who joined Morningstar in 1986 as our first mutual fund analyst and played a central role in establishing our mission and our independent voice.
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