Better New Dividend Stock: Salesforce, Meta Platforms, or Alphabet?

Several big tech companies have announced new dividends this year, with Salesforce (CRM 1.68%), Alphabet (GOOG -1.84%) (GOOGL -1.76%), and Meta Platforms (META -2.95%) all initiating their first dividends. While the payouts on these new dividends aren't drastic, they are the start of something much larger.

Which one of these is the new dividend payers is the best buy now?

The dividend yields aren't anything dramatic

Meta was the first of the trio to announce and pay its dividend. Investors first heard about Meta's dividend on Feb. 1 and received $0.50 per share on March 26. Salesforce was next, announcing its dividend on Feb. 28 with investors receiving a $0.40-per-share payout on April 11. Alphabet was last to the punch, with its $0.20-per-share dividend announced on April 25 and paid out on June 17.

While Meta pays out the highest amount per share, investors must use the dividend yield metric to understand how much they are receiving relative to the stock price.

Data sources: Meta Platforms, Salesforce, and Alphabet.

From this analysis, Salesforce has the better dividend, as it pays out more per share. But that's where each company currently sits. What investors want to know is where their dividend payments could go.

To understand that, let's examine the percentage of cash flows being used to fund the dividend.

Only a small portion of cash flow is being devoted to paying the dividend

The dividend payout ratio can be used to understand what percentage of a company's cash flows is used to fund the dividend. This is a critical metric for dividend investors to understand, as it reveals if a company has room to increase its payout or if one is heavily burdened by its dividend.

Two things are often used to evaluate this: earnings and free cash flow. Each has its merits, so let's examine both.

From an earnings-per-share (EPS) perspective, the stocks' dividend payout ratios are as follows:

Data source: YCharts.

This analysis shows that Meta and Alphabet hardly use any of their earnings to pay a dividend, while Salesforce is slightly more stretched. However, there is more to this metric than that. All three companies have had significant changes over the past year, so using a trailing-12-month EPS figure has its flaws. For example, of Salesforce's 12-month EPS total, 35% came from its latest quarter, showing that weaker results almost a year ago are skewing this metric.

This is why looking at the free-cash-flow (FCF) dividend payout ratio is a better choice, as free cash flow is a more consistent metric than EPS. By using FCF, we get a better idea of how much cash each company is truly paying investors.

Data source: YCharts.

From an FCF perspective, all three companies aren't paying investors that much of a dividend. This means there is plenty of room for the dividend to grow over many years.

Additionally, investors shouldn't be rooting for any of these three to max out their dividend payout, as there are plenty of exciting investment opportunities in fields like artificial intelligence (AI), an area all three are actively pursuing.

But if I had to choose a single winner, I'd probably pick Meta Platforms since it has the largest room to grow. However, you can't go wrong with the other two stocks.