The Return of Dividends in Tech & Growth Sectors

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In this episode, we explore a structural shift that is quietly reshaping the investment landscape, particularly across technology and growth sectors.For much of the last decade, markets rewarded scale, speed and market share above all else. Growth was the narrative, and profitability could wait. But that playbook is changing.As capital becomes more disciplined and investors more selective, a new priority is emerging: free cash flow, capital efficiency and sustainable margins. And with that shift comes something many thought had been left behind in the tech world, the return of dividends.Today, we unpack what is driving this change, why it appears structural rather than cyclical, and what it means for both listed and unlisted investors. From global tech leaders to Australian examples like Telstra and REA Group, we look at how companies are rethinking capital allocation and why returning cash to shareholders is once again front of mind.Most importantly, we’ll explore what this means for investors navigating private markets and pre-IPO opportunities in this new era of disciplined growth.

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Over the last decade or so, investors rewarded rapid growth above all else. Scalable revenue, user-acquisition metrics and potential market share associated with first mover advantage were the dominant signals of corporate success, even when profit and free cash flow were far from guaranteed. That regime produced spectacular corporates success stories but it also created a long tail of capital-hungry businesses that relied on ever available funding to sustain high growth. In the wake of rising rates, tighter private capital and a more discerning public market, a new equilibrium is emerging. Free cash flow, capital efficiency, demonstrable margins leading to sustainable profit are regaining primacy and with the return to fundamentals comes a renewed willingness among many growth and technology companies to return cash to shareholders through dividends, buybacks or special distributions. This is not a cyclical blip: it looks increasingly structural.

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The growth-over-profit era was enabled by a combination of abundant capital and persistently low interest rates. When capital is cheap, the opportunity cost of reinvesting every dollar inside the business is low; investors were ready to accept negative free cash flow if it funded faster growth and a path to market dominance. That calculus shifted significantly post-2021. Rising interest rates, higher borrowing costs and a more cautious lending and private investment landscape made funding expensive and less predictable. Investors, particularly wholesale investors, who allocate capital across both public and private markets started to place valuation multiples more firmly based upon evidence of durable margins and free cash flow conversion.

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That shift in investor preference alters corporate incentives and behaviour. When access to fresh capital becomes more conditional, corporate boards and management teams are forced to demonstrate that their existing capital is being deployed efficiently. Where that is the case companies are increasingly choosing to return surplus cash to shareholders rather than retain it for uncertain and risky incremental growth bets. The result is a rise in capital returns across sectors that historically kept cash for reinvestment.

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Growth without profits is now a higher-risk proposition. In contrast, robust free cash flow behaves like a moat: it funds organic growth, reduces dependence on external liquidity and creates optionality for management. For strategic investors, particularly those in unlisted or pre-IPO space, a predictable free cash flow profile reduces execution risk and the volatility of eventual exit outcomes. When companies convert topline growth into durable operating free cash flow, they can balance growth investments with disciplined shareholder returns. That balance appeals to a broad spectrum of wholesale investors who care about total return and downside protection.

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Even among technology businesses where reinvestment has historically been sacrosanct the companies that have matured into dominant positions are under pressure to monetize that stability. The global examples are instructive: a number of large-cap tech and tech-adjacent businesses have materially expanded buyback programmes and, in some cases, introduced or increased dividends as a method of returning capital and signalling confidence in future cash generation. Investors have been explicit in saying that dividends and buybacks matter again as part of a total-return framework.

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The Australian market provides clear case studies of this new orientation. Telstra, while a telecommunications incumbent rather than a pure software play, exemplifies the convergence of capital discipline and shareholder returns. In 2025 Telstra delivered strong earnings, announced a sizable buyback and continued to pay a reliable dividend stream, actions intended to reflect both operational strength and a willingness to share value with owners. For Australian investors, Telstra’s approach underscores how networked, cash-generative businesses in the technology and communications orbit can become compelling income-generating holdings.

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Digital marketplace and platform businesses listed on the ASX also demonstrate the trend. REA Group, the real-estate advertising platform, had a strong 2025 and rewarded shareholders with a 31% increase in dividends. The combination of high gross margins, low incremental capital intensity and repeatable cash flow makes dividend distribution feasible without sacrificing product investment. Once a platform reaches scale and consistently converts revenue to cash, shareholder distributions become an appropriate tool for capital management.

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Three structural drivers distinguish the current return-of-dividends from prior short-lived income rallies. First, investor composition has changed. A higher proportion of capital now sits with wholesale investors who integrate public market lenses into private capital allocations and market expectations. These investors prize cash flow disciplines that translate across both listed and unlisted exposures. Second, corporate capital structures have generally strengthened after the market repricing of the early 2020s. Companies that survived the funding reset are leaner, with better balance-sheet governance and clearer capital allocation frameworks. Third, macro conditions, broadly speaking, have normalised expectations about cost of capital. This means companies cannot rely indefinitely on the “growth at any price” model if they want to maintain favourable valuations.

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These drivers create an environment where returning capital becomes not only possible but strategically attractive. For boards, dividends and buybacks are signalling mechanisms: they convey that management has confidence in recurring cash flows and that there are no superior marginal uses for that capital. For private markets the implication is that investors will increasingly value businesses that can demonstrate both growth potential and a credible path to cash returns at scale.

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When evaluating unlisted opportunities private market investors should view this structural shift through a dual lens. On one side, the re-emergence of dividends increases the attractiveness of later-stage private investments that can credibly project sustainable near-term cash return profiles. On the other side, the shift raises the bar for companies raising capital: founders and management must justify any capital requirements by linking it to demonstrably superior return opportunities versus alternative investments.

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This dynamic favours business models with high incremental margins and low capital intensity: SaaS companies with predictable subscription economics, marketplaces with strong take rates and low fulfilment costs and platform businesses with scalable customer acquisition economics. It also means that due diligence must focus as much on unit economics and cash conversion as on topline growth forecasts.

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Returning capital to shareholders is beneficial when it reflects genuine surplus cash rather than a temporary fix to an equity valuation problem. There is governance risk: boards can be tempted to boost short-term returns at the expense of long-term value creation. Well-structured distribution policies, transparent capital allocation frameworks and disciplined reinvestment thresholds mitigate that risk. For wholesale investors, obtaining clarity on dividend policy triggers and reinvestment governance is increasingly important. The best outcomes arise when capital returns are an outcome of robust, repeatable economics rather than an expedient attempt to placate investor sentiment.

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For investors operating in the unlisted space, the emergence of dividends in tech and growth sectors should recalibrate how opportunities are evaluated. Focus on cash conversion: measure how much operating free cash flow the business generates from each dollar of revenue and how that metric evolves with scale. Evaluate capital intensity: capital-light businesses have the optionality to return cash earlier without jeopardising growth. Assess margin durability: sustainable gross margins determine how much of growth converts to cash. And finally, consider shareholder governance arrangements that allow minority investors to benefit from distributions when they occur.

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There is also a portfolio-level consideration. The return of dividends complements rather than replaces growth risk exposures. Investors can blend allocations to high-growth, high-reinvestment businesses with stake-sized exposures to mature, cash-generative private companies that return capital. This combination can smooth realised returns, reduce downside volatility and improve cash yield profiles for portfolios that use unlisted exposure for diversification and enhanced returns.

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The re-emergence of dividends and capital returns within technology and growth sectors marks a meaningful rebalancing of investor and corporate incentives. It reflects structural market changes: higher and more persistent cost of capital, a tougher private funding environment and a maturing cohort of businesses that can convert scale into cash. For Australian investors and companies, the examples are evident in both telco and platform businesses that combine strong margins with a willingness to return excess cash. For wholesale investors, the core audience for PrimaryMarkets, this shift provides new opportunities to source cash-yielding, growth-oriented investments in the unlisted sector, while also raising the importance of rigorous cash-flow-focused due diligence.

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As capital allocators and dealmakers recalibrate, the most successful companies will be those that can articulate a credible capital allocation framework: one that balances re-investment for growth with disciplined returns of cash when warranted. That balance is the essence of capital efficiency, and in the new era it is fast becoming the primary metric by which growth and technology businesses are judged.

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And that brings us to the end of this episode of Unlocking Liquidity. Thanks for spending your time with us, we hope today’s conversation gave you a fresh perspective on private markets and how liquidity is evolving. If you enjoyed the episode, please follow or subscribe wherever you listen, and feel free to share it with someone who’d get value from it. For more insights, opportunities and episodes, visit PrimaryMarkets. Until next time, thanks for listening, and we’ll see you in the next conversation.