Dividend stocks reward investors with the potential for enhanced returns over time, and a few companies may have the wherewithal to start offering the payments, according to Morgan Stanley. A few big names joined the ranks of dividend payers in 2024, led by tech giants Meta Platforms , Alphabet and Salesforce , that began making cash payouts. The income payments themselves were modest to start with — dividend yields remain well below 1% — but Facebook parent Meta already announced a 5% dividend hike in February, to roughly 53 cents per share. Dividends reward long-term shareholders, who have the option of reinvesting them over time, which has the effect of compounding returns . To that end, Morgan Stanley called out a list of companies that may be poised to start spinning out income to investors. “With the goal of generating new ideas and capturing additional alpha, we’ve identified companies that should have the ability to pay a dividend (and therefore potentially earn outsized returns),” strategist Todd Castagno said in a March 6 report. He and his team identified companies that have the potential to soon initiate dividend payments — names that have a net cash position that is greater than 5% of their market capitalization and that generate a free cash flow yield that exceeds 3%. Managed care provider Molina Healthcare made Morgan Stanley’s list. Shares are up 8% in 2025, outperforming the S & P 500’s decline of nearly 5%. Molina has a free cash flow yield of 10.9%. The stock has come into focus recently as Republican lawmakers weigh cutting spending on Medicaid . However, analysts at Wells Fargo upgraded Molina to overweight from equal weight this month, hiking their price target to $372 from $295. The team thinks major cuts to Medicaid may not be the most likely outcome of efforts to control government spending, and that work requirements for the program “would not appear problematic for the industry.” “We think risk/reward has improved, as there are increasing indications that the most disruptive cuts to Medicaid are unlikely to be politically viable and our analysis leaves us comfortable that the more realistic changes would prove manageable for Medicaid [managed care organizations],” said analyst Stephen Baxter in a March 5 report. Wall Street is largely split on the stock, with seven of 17 analysts rating it the equivalent of a buy, while eight deem it a hold, per LSEG. Cloud communications company Twilio also emerged on Morgan Stanley’s list. Shares are off more than 8% in 2025. The company has a free cash flow yield of 4.7%, the bank found. Despite Twilio’s difficult start to the year, analysts like the stock. Eighteen of 30 analysts rate it a buy or strong buy, according to LSEG. Late last month, Morgan Stanley analyst Meta Marshall upgraded her rating on Twilio to overweight, lifting her 12-month price target to $160 from $144. She said a sell-off in the stock on the heels of its latest quarterly results was “overdone” and that it created an “attractive buying opportunity” for investors. “We see opportunity for both multiple expansion and estimate revision across FY25 as [a] reacceleration story is proven out,” she wrote in a Feb. 24 report. She pointed to improved cross selling, as well as traction in channels and product innovations, including artificial intelligence. Finally, Morgan Stanley highlighted identity management company Okta . Shares are already up roughly 43% in 2025, and the company has a free cash flow yield of 5.4%, the firm found. Earlier this month, Okta posted fourth-quarter revenue and earnings that topped Wall Street estimates, and issued first-quarter revenue guidance that surpassed analysts’ expectations. “Okta should be able to reaccelerate growth over the next several quarters as renewal headwinds abate, [Go to Market] strategy is further refined and new products continue to gain traction — driving our positive view on the shares,” Morgan Stanley analyst Keith Weiss wrote in a Tuesday report. He also noted that fourth quarter results were “strong,” adding that he sees “a favorable setup through CY25.” Weiss is largely in good company, as 23 out of 41 analysts rate Okta the equivalent of a buy, according to LSEG. Other stocks that made Morgan Stanley’s list of potential dividend initiators include Deckers Outdoor , Veeva Systems , Arista Networks and UiPath .
