Alphabet issues first-ever dividend triggering an immediate 15% surge in share price

Alphabet, Google's parent company, announced on Thursday its first-ever dividend of 20 cents per share. The company then went on to authorize the repurchase of up to $70 billion in stock, the second such mandate in two years.

In 2022 Alphabet also repurchased more of its own stock than any other company aside from Apple indicating that it has been gearing up for this announcement.

The news coupled with better-than-expected first-quarter earnings, caused shares to surge by 15% in after-hours trading. With $108 billion in cash and marketable securities as of March 31, 2024, Alphabet seems well-positioned to return value to its shareholders.

The decision to start paying dividends reflects a shift in strategy and a growing trend among big tech. Alphabet's move seems to echo Meta's decision to issue its first-ever dividend back in February. Meta's announcement led to a 14% surge in its shares.

The dividend, payable to all classes of shares, including super-voting Class B and nonvoting Class C shareholders, will be distributed to all shareholders of record as of June 10. Co-founders Sergey Brin and Larry Page stand to receive substantial payouts. Brin is set to receive $146 million, while Page will receive $78 million.

The tech industry has been under pressure to show a more disciplined approach to spending. Since 2022, major tech firms have announced layoffs and tightened spending, which has been well-received by investors. Alphabet's move underscores its commitment to rewarding its shareholders.

In contrast, Amazon, one of Alphabet's main competitors, has never issued a dividend and has not authorized share buybacks on the scale of Alphabet's. Amazon's largest share repurchase, in 2022, amounted to $10 billion.

Alphabet's announcement comes just before Amazon's first-quarter earnings report on Tuesday. This leaves investors curious about how the e-commerce giant will respond to Alphabet's latest move.