Dividend stocks can boost returns for investors over the long term, and Morgan Stanley believes many companies are in a position to start paying dividends. In fact, companies that start issuing dividends have the potential to reap “huge returns,” strategist Todd Castagno said in a note Wednesday. The bank found that stocks that started paying regular quarterly dividends outperformed the market by an average of 650 basis points in the six months following the announcement. Castagno wrote that they were outperformed by 1,000 basis points in the 12-month period following the announcement. 1 basis point equals 0.01%. In addition to this, if the dividends themselves are reinvested, you will receive compounding returns over the long term. “Many dividend-initiating companies start paying with an average yield of 2.0%, with the highest initial yields in the consumer staples, utilities and energy sectors, and the lowest in the information technology, industrial products and consumer discretionary sectors,” he said. With that in mind, Castagno and his team looked for companies with the ability to start paying dividends. To identify these so-called “dividend seekers,” he screened companies with no current quarterly dividends, a net cash position greater than 5% of market capitalization, and a free cash flow yield greater than 5%. Here are some of the names on the list. Castagno said Centene meets all dividend requirements, including an 18% free cash flow yield. Greenlight’s David Einhorn is among those bullish on the health insurance company, pitching it as one of five investment ideas at the Thorn Investment Conference earlier this month. “Artificial intelligence is well-suited to automating manual and repetitive functions, and we believe Centene can greatly benefit from AI in this way,” he said. Centene also recently beat expectations for first-quarter adjusted earnings per share and revenue. The company also raised its full-year forecast. The stock is up 44% since the beginning of the year. BioMarin Pharmaceuticals also won the slot with a free cash flow yield of 10.4% and a net cash position representing 7.6% of market capitalization. The company completed its $4.8 billion acquisition of Amicus Therapeutics last month, expanding into rare metabolic diseases. Amicus’ portfolio includes approved drugs to treat genetic diseases, including Galafold, an oral drug for Fabry disease, which is caused by a genetic mutation that causes fatty substances to accumulate in cells. “With the completion of the Amicus Therapeutics acquisition and the addition of GALAFOLD and POMBILITI + OPFOLDA to our commercial portfolio, we will be able to reach patients with Fabry and Pompe disease, meaningfully strengthening and accelerating our growth rate in the near to medium term,” CEO Alexander Hardy said in a quarterly earnings call earlier this month. Due to acquisition costs, BioMarin slightly lowered its full-year 2026 non-GAAP earnings per share outlook, but raised its full-year earnings outlook. The company now expects revenue to be between $3.825 billion and $3.925 billion, up from its previous guidance of $3.325 billion to $3.425 billion. The stock is down 6% since the beginning of the year. Meanwhile, Duolingo is down nearly 36% year to date in 2026. Duolingo, the maker of the popular language learning app, recently reported better-than-expected first-quarter sales and earnings before interest, taxes, depreciation, and amortization. However, the number of daily and monthly active users was lower than estimated. Daily active users totaled 137.8 million in the first quarter, up from 133.1 million in the previous quarter, but short of the 145.6 million expected by analysts surveyed by StreetAccount. Duolingo aims to reach 100 million daily active users in 2028. “We believe that growing our user base will significantly increase the value of Duolingo, which is why we are prioritizing better education and growing our audience,” CEO and co-founder Luis von Ahn said in a letter to shareholders. Finally, Deckers Outdoor announced last week that its fiscal first quarter sales and bottom line improved significantly. The maker of Hoka sneakers and Ugg boots has a free cash flow yield of 6.7%, Castagno said. Stifel analyst Peter McGoldrick also rates the stock a “buy.” “Decker’s portfolio of category-defining brands maintains a reliable growth runway, favorable profit structure and outstanding return metrics,” he said in a note Friday. The stock price has risen nearly 10% this year.
