By Ian Salisbury

Investors love companies that grow dividends over time. But guessing which companies will initiate their first dividend can be a way to get in on the ground floor.

More than a dozen large-cap companies could be poised to join the dividend club, based on cash holdings and free-cash flow yield, according to Morgan Stanley. The list includes Centene, Deckers, Airbnb and 13 others, according to a report published last week.

S&P 500 companies that initiate and grow dividends have retuned 10.2% a year on average going back to 1973, according to Hartford Funds data, that handily beats both companies that simply pay a dividend (9.2%) and those that don't pay a dividend (4.2%).

Tracking just companies that initiate dividends is harder, but these also appear to deliver for investors. The VettaFi US Large Cap Dividend Initiators Index would have returned 13% a year over, on average, the past 10 years. That doesn't match the 15.5% return of the broad market. But considering the index only has about has about half the S&P 500's tech exposure it's a solid result. (It's worth noting the index was launched only in 2024, so the returns are hypothetical)

"Dividends can offer a reliable income stream, signal confidence to the market, and help stabilize portfolios during periods of uncertainty and high valuations," wrote the Morgan Stanley team led by strategist Todd Castagno.

To identify companies that have the wherewithal to start paying dividends Morgan Stanley screened for names with a hefty cash on hand -- at least 5% of their market capitalizations -- and a free cash flow yield of at least 5%. Free cash flow yield, is similar to dividend yield, except that it substitutes free cash flow for a company' annual payout. To simplify, Morgan Stanley also broke out the names with market values of at least $10 billion.

The list of 16 names includes healthcare companies BioMarin Pharmaceutical, Incyte, Neurocrine Biosciences, United Therapeutics, Centene, and Align Technology.

Tech names include HubSpot, Zoom, Veeva Systems, Dynatrace, Toast, Okta, and the Trade Desk

Also on the list were consumer facing companies: SoFi Technologies, Deckers Outdoor, and Airbnb.

Handicapping which companies are most likely to actually start paying is difficult, but its worth considering a number of factors.

While software stocks on the list like Zoom, Okta and the Trade Desk have strong numbers, they are girding for a widely expected battle with AI.

A better bet may be managed care provider Centene. That has been a tough business lately, thanks to a mismatch between costs and the rates managed care companies are allowed to charge states. But the business appears to be on the mend. And at least two of Centene's rivals already pay dividends. UnitedHealth Group yields 2.3% and Elevance Health pays out 1.7%.

Deckers, maker of Ugg boots and Hoka sneakers, seems like another potential future payer, given its line of business. While upstart rival On Holdings also pays no dividend, established players like Nike (3.6% yield) and Adidas (0.8% yield) certainly do.

Centene and Deckers didn't immediately respond to a request for comment.

Write to Ian Salisbury at ian.salisbury@barrons.com

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June 02, 2026 01:30 ET (05:30 GMT)

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