Morgan Stanley says these ‘dividend hopefuls’ are poised to outperform if they initiate a payout Morgan Stanley’s strategist Todd Castagno highlights that companies initiating regular quarterly dividends have historically outperformed the market. The bank identified potential ‘dividend hopefuls’ by screening for companies with a net cash position greater than 5% of their market cap and a free cash flow yield exceeding 5%. Companies like Centene, BioMarin Pharmaceutical, Duolingo, and Deckers Outdoor are discussed as potential candidates.

• Companies initiating regular quarterly dividends have historically outperformed the market significantly in the six and twelve months following the announcement.
• Morgan Stanley screened for companies with no current quarterly payout, net cash greater than 5% of market cap, and free cash flow yield over 5%.
• Centene is noted for its strong free cash flow yield and potential AI benefits, with recent positive financial results and raised guidance.
• BioMarin Pharmaceutical, following its acquisition of Amicus Therapeutics, has strengthened its commercial portfolio and boosted revenue guidance, despite a slight reduction in non-GAAP earnings per share guidance.
• Duolingo’s stock has declined despite topping revenue and earnings expectations, due to daily and monthly active users falling below estimates.
• Deckers Outdoor, maker of Hoka and Ugg brands, also showed strong financial performance and possesses credible growth runway and advantaged margin structure.