Well, well, well. Look who finally decided to join the grown-ups table. PayPal, the granddaddy of digital payments that’s been around since the late ’90s, just did something it’s never done before: started paying dividends. And investors? They’re absolutely here for it, sending the stock up a whopping 13% on Tuesday.
Let’s break down what happened, because this is actually pretty wild when you think about it.
The Numbers Don’t Lie
PayPal’s Q3 earnings were solid across the board. Revenue hit $8.4 billion (up 7% year-over-year), beating estimates of $8.2 billion. Net income jumped 24% to $1.25 billion, and earnings per share climbed 32% to $1.30. Not too shabby for a company that some folks had written off as yesterday’s news.
But here’s where it gets interesting: PayPal’s transaction margin dollars—basically the money they actually keep after all the expenses—rose 6% to $3.9 billion. That’s the real meat and potatoes of their business model.
The slightly less exciting news? Their take rate (the percentage of each transaction they pocket) dropped from 1.89% to 1.84%. Translation: they’re doing more business, but some of it’s lower-margin stuff. It’s like being a restaurant that’s busier than ever but selling more $5 appetizers than $50 steaks.
The Dividend Bombshell
Here’s the kicker that got everyone excited: PayPal announced its very first dividend program. Starting in December, shareholders will get 14 cents per share quarterly. It’s not going to make anyone rich overnight, but for a company that’s never paid dividends in its 25+ year history, this is basically PayPal saying, “Hey, we’re not just a growth story anymore—we’re a real, mature business.”
The timing makes sense. Free cash flows are up 19%, and when you’re generating that kind of cash, you’ve got to do something with it. Why not share the wealth?
AI Partnerships That Actually Matter
PayPal also dropped some news about AI partnerships that sound less like buzzword bingo and more like actual business moves. They’re teaming up with OpenAI to let ChatGPT users buy stuff directly through PayPal, and they’ve got a deal with Perplexity for AI-powered shopping assistants.
CEO Alex Chriss called it “building for an agentic future,” which sounds very fancy but basically means: “What if AI could shop for you and pay with PayPal?” Honestly, not the worst idea in a world where we’re all too lazy to comparison shop.
The Reality Check
Let’s be real for a second. PayPal stock is still down 11% year-to-date, and it’s trading at just 14 times earnings—which is pretty cheap for a tech stock. RBC bumped their price target to $91 (up from $88), but the stock closed around $76.
The company now has 438 million active accounts, up from 432 million last year. That’s growth, but it’s not exactly explosive. PayPal is in that weird middle ground where it’s not a hot growth stock anymore, but it’s also not quite the boring dividend aristocrat yet.
The Bottom Line
PayPal’s dividend announcement is significant because it signals a fundamental shift in how the company sees itself. They’re no longer the scrappy fintech disruptor—they’re the establishment. And sometimes, being the establishment isn’t so bad, especially when you’re generating billions in cash flow and finally willing to share it with shareholders.
Will this dividend turn PayPal into the next dividend darling? Probably not. But it might just be the thing that gets income-focused investors to take another look at a stock that’s been beaten down for way too long.
Sometimes growing up isn’t so bad after all.