Speculate - The Next S&P 500 DGI Stock

[Otter]

What will be the next S&P 500 component to transition from growth mode to a mature company that needs to find other ways to return profits to shareholders (like dividends)? Apple made the transition several years ago, and looks set to be a solid DGI pick for years to come. Who do you think will be next? AMZN, FB, GOOG/GOOGL? How growthy can an $840 Billion market cap company like Amazon be before antitrust, regulatory, or other pressures rein it in? eWalmart (AMZN) is my pick for S&P 500 component not currently paying a dividend that will do so first. I think shareholders will ultimately demand it. Two of AMZN's largest revenue segments, retail (online sales) and AWS, are segments that have a lot of dividend paying company in the S&P (WMT, TGT, MSFT, ORCL, IBM). They are also the types of business that should generate fairly reliable profit streams capable of supporting a dividend. 

Don't know that such a transition will necessarily be a good thing for the underlying stock price in the short term immediately after such an announcement. AAPL's price action was pretty choppy and sustained to the downside for about six months after it announced that it was initiating a dividend (for the first time in nearly two decades) in July, 2012, while the S&P 500 continued its general uptrend.  That said, people who jumped on the opportunity to buy AAPL in the $60s in 2013 have seen some substantial price appreciation and roughly a doubling of their initial dividend payout.

Anyone else have any thoughts as to which S&P 500 component is likely to make a transition from growth to DGI mode?

[fenders53]

I have thought about this some. I don't see it happening at AMZN unless a spin off occurs, which may be forced some year soon for the reasons you stated. All segments are still growing adequately, though many are decelerating which is normal of course. AWS grew at at 45% YOY, advertising at 95%. Their stock valuation is the challenge for the near term. I think that had some bearing on MSFT, INTC and CSCO decisions long ago. They were flying like AMZN in the day. They were staring at years of growth to return to their previous share prices, and the growth rates investors were accustomed too were long gone.

After taking a year off to book some real EPS in 2018, CAPEX increases were announced for 2019 during AMZN earning call today. I think Bezo's pursuit of world domination will continue until he is stopped. He has yet to conquer brick and mortar retail, FEDEX is still in business, and AMZN has still never built a car or landed on the moon.

Anyone have any thoughts on GOOG? I can't even take FB serious anymore with all their recent amateurish errors. Yeah I did see their blow out quarter lol. They are an advertising machine until somebody displaces their social media dominance.

[DividendGarden]

(01-31-2019, 09:04 PM)fenders53 Wrote: Anyone have any thoughts on GOOG?  I can't even take FB serious anymore with all their recent amateurish errors.  Yeah I did see their blow out quarter lol.  They are an advertising machine until somebody displaces their social media dominance.

GOOGL and BRK are the only non-dividend paying companies that I own.  I think that eventually, both of them will become dividend payers.

[Otter]

(02-01-2019, 09:49 AM)DividendGarden Wrote:

(01-31-2019, 09:04 PM)fenders53 Wrote: Anyone have any thoughts on GOOG?  I can't even take FB serious anymore with all their recent amateurish errors.  Yeah I did see their blow out quarter lol.  They are an advertising machine until somebody displaces their social media dominance.

GOOGL and BRK are the only non-dividend paying companies that I own.  I think that eventually, both of them will become dividend payers.

I think BRK will do so very quickly after Warren Buffett dies. There will probably be a large, irrational spike down in stock price immediately after that happens, which would be silly, but that's how the market works sometimes. Berkshire has done an amazing job of assembling a financial/industrial conglomerate, consisting of quality companies with stable and good management, who will continue to deliver returns as they always have. I do think the aura of Buffett disappearing will force the organization to pay a dividend, though. Matching or underperforming the S&P 500 as a mature conglomerate kinda calls for it. Investors are likely to feel that a return of some share of the profits is needed to offset the risk that the Oracle won't be redeploying the profits anymore (regardless of whether he has been the main driver of several decisions by BRK over the past decade).

[fenders53]

I agree with all of that. It is honestly the only thing that keeps me out of BRK for now. Warren and Charlie's machine is in place and he is not running it so much these days. I've learned that much watching youtube vids on them. Their love for banks and insurance dominates though. Perfect candidates for dividends. Hoarding cash is going to make them under perform eventually. The only thing worse than that would be trying to force all that cash on the market at current valuations.