One of the more closely watched stocks in the tech world lately has been consulting company Accenture (NYSE: ACN). That’s because it’s plunging deep into the rapaciously hungry market for artificial intelligence (AI) know-how.
Unlike the typical tech (or tech-adjacent) stock, Accenture is a steady, and reliable, dividend payer, handing out a shareholder distribution every quarter. For investors who believe in the company, here’s how much of a stake is required to draw $1,000 annually from its dividends.
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In October, Accenture and top AI equipment and solutions supplier Nvidia announced a significant expansion of their existing partnership. The cornerstone of this is Accenture’s formation of the Nvidia Business Group, an in-house consultancy unit devoted solely to helping clients harness AI solutions powered by the hotly popular chip maker.
Accenture’s AI division will be sizable. It said that it’ll be “supported” by more than 30,000 people receiving specialized training for this cutting-edge consultancy work.
Generative AI has already contributed generously to Accenture’s fundamentals, to the tune of $3 billion worth of client bookings in its recently concluded 2024 fiscal year. It’s easy to imagine that figure rising steeply if the company sells and manages that service effectively.
Getting around to that dividend, $1,000 annually in shareholder payouts requires owning 169 shares of Accenture stock. As of Thursday’s market close, this costs $58,820 and change.
With that level of commitment, we have to ask whether the distribution is sustainable. I think it is.
The disciplined and reliably profitable Accenture tends to generate around $8.5 billion annually in free cash flow (FCF), which is more than enough to fund the dividend payout. This expense totaled $3.2 billion in fiscal 2024, for example. Much of the remainder is usually swallowed by share repurchases ($4.5 billion that year).
To me, Accenture is a fine and somewhat under-the-radar way to play the AI explosion we’re currently witnessing. The company is tied tightly to a leading supplier in the business, and it should see a commensurate rise in its fundamentals as a result.
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Eric Volkman has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Accenture Plc and Nvidia. The Motley Fool recommends the following options: long January 2025 $290 calls on Accenture Plc and short January 2025 $310 calls on Accenture Plc. The Motley Fool has a disclosure policy.
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