A shift to technology companies paying out dividends rather than holding onto cash to reinvest or buying back shares has got some thinking about the balance of capital growth and income.

Meta and Salesforce are the latest companies to announce dividend payments.

Sam Witherow, manager of the JPM Global Equity Income fund, said that while his fund has long combined companies which pay out a dividend with those which offer capital growth, the nature of some of these companies is changing.

He said: "More recently we have seen signs that internet/media companies are starting to warm up to dividends with Meta initiating a meaningful $6bn annualised payout (on top of substantial buybacks). This is a natural evolution as business models mature and efficiency gets prioritised over “moonshot” capital spending. We would expect some of the other dividend holdouts to eventually follow-suit."

Meta is only the third of the magnificent seven to pay a dividend and the average yield on the three that do (Meta, Microsoft and Apple) is 0.6 per cent, so it may be a bit premature to pop open the ‘income’ champagne.

But some have pointed out that it does beg the question of the compatability of income with an objective of delivering capital growth.

Witherow said: "We are seeking to provide clients with both a yield premium to the market and a dividend growth premium to the market at the aggregate portfolio level. It’s the combination of the two characteristics that typically leads to the best risk-adjusted returns.

"To deliver this we have always looked to have diversified exposure across global industries including traditionally growthier industries like consumer discretionary or tech."

Sam Buckingham, investment manager at Abrdn Portfolio Solutions, says growth stocks which pay smaller dividends can be helpful for income funds to increase diversification across sectors and factors.

He says: “These stocks tend to have lower initial dividends, but with the potential to grow over time. This can balance well in a portfolio when combined with more traditional dividend stocks that pay higher initial dividends (with lower growth), such as utility stocks.

“You should not expect high growth stocks, though, to ever be a dominant component of an income fund.

“If a stock is growing at above-average rates then there should be a preference for management to re-invest in the business at these attractive rates of return, rather than paying out meaningful dividends and starving it of capital for re-investment.”

As things stand, the IA Global sector has a higher exposure to tech companies than the IA Global Equity Income sector. So far, so unsurprising - though the equity income sector still has tech as its highest single sectoral exposure.

James Flintoft, head of investment solutions at AJ Bell, said the fact some big tech companies were turning on the dividend tap would be good news for income investors since it will change the nature of market indices.

He said: "Of course, the sheer scale of some of the companies now turning on dividends may merely suggest that capital cannot be deployed internally at attractive rates of return in the vast scale required, which is entirely understandable and speaks to good capital allocation decision making.

"For income mandates this will be welcome news, as it will allow the sector biases of typical income indices to be addressed in time. However, those that become serious yielders are likely to be ex-growth."

Richard Philbin of Hawksmoor uses several global equity income funds within his growth portfolios and he attributed the development to the large growth many tech companies have seen recently.

He said: "Many companies in the tech space are growing at very fast levels, and with lots of cash on the balance sheet they can become balance sheet inefficient – therefore paying out some of the excess cash can keep them nimble.

"Of course many will also buy back their shares, but this is a fine line when the share price performance has been excellent.

"At the end of the day, they have to deliver the best shareholder total return and dividends can be welcomed.

Close Brothers Asset Management, head of equities Giles Parkinson says fund managers need to keep in mind the income commitment of their funds.

He says: “Of course, a bird in the hand is worth two in the bush, and the future is uncertain, so investors may prefer the perceived security of the unchanging 10 per cent yield over the 5 per cent offering potential growth.

“But there could also be uncertainty around the persistence of that 10 per cent level, which is not guaranteed.

“At the overall portfolio level, managers need to bear in mind the income commitment of their fund to investors; it could be that including too many stocks with initially low yields will compromise an absolute income objective.”

Indeed as David Freitas at 7IM points out, the payment of one dividend can create the expectation of more to come.

"One you start paying out, it's very hard to stop," he said.

But over at RBC Brewin Dolphin, investment manager Rob Burgeman says either an income-only or capital-growth-only strategy can be detrimental to a fund or a portfolio in the long-term.

He says: “At the end of the day, the total return to an equity investor comes in two forms: capital growth and dividends.

“The first is inherently uncertain, buffeted by the waves of economic and geopolitical events. Dividends, on the other hand, tend to be a far more certain thing. Yes, companies can (and do) cut their dividend payments from time to time – witness what happened during the Covid pandemic.

“Nevertheless, most companies who pay dividends like to maintain a progressive dividend policy, which provides a greater degree of security in difficult times.

“This, in turn, can provide a portfolio with 'go slower' stripes in turbulent times, albeit that it can act as a brake in a bull market environment.”

Tara O'Connor is senior reporter at FT Adviser