For many years, there has been a widespread belief among investors that technology companies do not pay dividends . But is this actually true and does it even matter to investors?
17 August 2025
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How did this belief come about?
This notion stems from the early days of the tech industry, when companies were primarily focused on rapid growth and reinvestment. During the dot-com boom of the late 1990s and early 2000s, many tech firms preferred to redirect profits back into their business to fund further growth initiatives, prioritising expanding market share over returning capital to shareholders. As a result, dividends were rare in the tech sector, forming the belief that tech companies do not pay dividends.
Do tech companies pay dividends?
As the industry has matured, several established tech giants have adopted dividend policies to reward shareholders. This includes Microsoft Corporation, which has been paying dividends since 2003 and has consistently increased its dividend payouts over the years.1
In fact, three out of four information technology (IT) companies within the MSCI ACWI index – one of the most widely referenced global equity indices in the world – paid dividends in 2024.2 Not bad for a sector that presumably does not pay dividends.
Are the dividend payouts comparable against other sectors?
Having said that, the percentage of dividend-paying IT companies (75%) is lower compared to most other sectors.2 In 2024, the IT sector ranked second from the bottom, slightly above health care. Examining the dividend history of MSCI ACWI members over the past decade shows that the IT sector has consistently been in the bottom three. But why is that the case?
A possible explanation is that in addition to allocating earnings toward research and development, innovation, and growth initiatives, the IT sector frequently incurs substantial capital expenditures for infrastructure. For instance, Microsoft is projected to invest US$80 billion in fiscal year 2025 on data centre construction to support AI (artificial intelligence) workloads. Such significant investments may consequently limit the cash available for dividend distributions.
Did you know?
At Capital Group, our investment philosophy is firmly rooted in a bottom-up approach. While sector-wide data provides useful insights into prevailing market trends and developments, such aggregate information may not always reflect the specific operational dynamics of individual companies.
Do dividends even matter?
Still, some investors may ask, why do dividends even matter? Well, dividends can be important for several reasons:
- Signal of financial health: Companies that pay dividends often signal financial stability and confidence in their future earnings. Regular dividend payments can indicate that a company is generating sufficient profits.
- Income generation: Consistent dividend payouts provide a steady income stream, which can be particularly appealing to those seeking regular income from their investments.
- Total return: Dividends contribute to the total return of an investment. Even if the stock price doesn't increase significantly, dividends can make up a substantial portion of the overall return.
- Buffer against volatility: During periods of market volatility, dividends can potentially provide a cushion, offering returns even when stock prices are fluctuating.