Alphabet (GOOG -0.15%) (GOOGL -0.30%) and Meta Platforms (META -1.17%) are two famous stocks people tend to associate with online search, social media, or artificial intelligence (AI). Even among investors, these tech leaders hardly evoke dividend investing. Yet, Alphabet and Meta Platforms are dividend payers, and although that's not the most important reason to purchase their shares, it certainly doesn't make them less attractive. These tech dividend stocks are great buy-and-hold forever options.
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1. Alphabet
Alphabet's shares fell last week in response to news that Apple plans to add an AI-powered search option to its Safari browser. Some investors saw that development as a threat to Google's online search dominance, which would be a problem considering Alphabet generates the lion's share of its revenue through this business. However, none of that changes Alphabet's prospects. It wouldn't be the first time someone tried to topple Google's dominance.
Most recently, Microsoft added AI functionalities to its Bing search engine -- but so far, it hardly made a dent in Alphabet's search empire. One of Alphabet's strengths that makes it hard for competitors to wrestle market share away from it in this industry is its brand name. Google is intimately tied to what it does. It's almost automatic for people to turn to Google for online queries. It will be extremely difficult for any rival to get people to change this behavior.
However, Google also benefits from the network effect. The more search volume it supports, the more data Alphabet can collect to improve and fine-tune search results, which attracts even more volume. Further, Alphabet has also added an AI overview to its search results, with some success.
Alphabet should remain the leader in its niche for a long time and benefit from the growing demand for digital advertising. The company has several other growth avenues. Its efforts in cloud computing (which is only improving thanks to AI) and streaming through YouTube are increasingly paying off. The company ended 2024 with a combined $110 billion revenue run rate for YouTube and Google Cloud. For context, it generated $350 billion in total revenue last year.
Alphabet benefits from the network effect and switching costs across its streaming and cloud computing businesses. So, the company is a leader in several tech segments, generates excellent financial results, has a competitive edge, and has a substantial growth runway -- all things that companies that perform well over many decades tend to have. Lastly, Alphabet initiated a dividend in 2024 and currently offers a $0.21 per share quarterly payout. At the current share price, that gives it a yield of about 0.5%.
The stock is still early in its dividend journey, but there are other excellent reasons to buy it and hold onto it for good. The dividend is the icing on the cake.
2. Meta Platforms
Though there is more competition in the social media landscape than there was in its early days, Meta Platforms remained the undisputed leader, at least in terms of the number of people using its services. Meta boasts 3.43 billion daily active users across its websites and apps, which include Instagram, Facebook, Messenger, and WhatsApp. It makes most of its money from advertising.
Recent initiatives helped boost this already profitable business. The company increased engagement thanks to AI-powered algorithms. Of note, Meta Platforms also benefits from the network effect. Take Instagram, which helps friends and family members stay in touch and share pictures, and gives businesses and influencers ways to promote products and brands. The more people are on the platform, the more effective it becomes for these purposes. That's why it'll be hard to knock Meta Platforms off its throne, and its efforts to boost engagement on its platform should allow it to continue attracting plenty of ad volume.
The company is pursuing other growth opportunities, too. It has doubled down on AI. Though it is not yet monetizing its large language model Llama and other AI-based initiatives, no doubt it will eventually seek to do so, considering the company's significant investments in AI infrastructure. Meta Platforms has other initiatives that could pay off down the road, including its ambitious metaverse efforts.
Most importantly, the company can conjure up an array of monetization schemes to profit from all those active users. That's a key reason Meta Platforms looks like a forever stock. The company's excellent underlying business should allow it to perform well over the long run and sustain its freshly initiated dividend program. The company distributes a quarterly payout of $0.53 per share, which at the current share price gives it a yield of about 0.3%. Growth-oriented investors can boost their long-term returns by buying Meta Platforms' shares and reinvesting their dividends.
