PayPal Now Pays a Dividend and Buys Back Billions in Stock. Where Will It Be in 5 Years?

Despite some gains over the last few months, PayPal (NASDAQ: PYPL) stock has been a huge underperformer over the last five years. The company's share price has fallen roughly 79% over the stretch. Meanwhile, the S&P 500 and the Nasdaq Composite indexes have risen 79% and 90%, respectively. On the other hand, PayPal has continued to generate substantial profits -- and it's making a big push to return cash to shareholders. With the company now paying a dividend and moving forward with a large share repurchasing plan, where will PayPal stock be in five years? Missed Nvidia in 2009? This Rare Signal Is Flashing Again. In 2009, a "Double Down" signal flashed for a little-known chipmaker called Nvidia. For the first time in years, that same "Total Conviction" signal is flashing for a company 1/100th the size of Nvidia. Continue " Image source: Getty Images. What's PayPal doing with dividends and buybacks? Last October, PayPal announced that it would begin paying a dividend. The company started its quarterly dividend at $0.14 per share and has maintained it at that level, with management stating it targets a long-term payout ratio of roughly 10%. In other words, the company plans to return roughly 10% of its non-GAAP (adjusted) net income to shareholders as cash payouts. Whether that means the company will be paying a variable dividend tied to that level -- which could result in lower distributions if earnings slip -- remains to be seen. However, there's a good chance that management will maintain the current dividend in the near term, and it plans to deliver steady payout increases in conjunction with earnings growth. PayPal's dividend currently yields roughly 1.1%. While dividends are now a priority for PayPal, returning cash to shareholders through stock buybacks is a much bigger part of the company's capital return policy. Management has said it expects to return between 70% and 80% of free cash flow (FCF) to shareholders, with the vast majority going toward stock buybacks. Companies typically retire shares when they buy back their own stock, thereby boosting earnings per share and supporting the stock price. With PayPal making efforts to reenergize growth, continuing with efficiency initiatives to improve profitability, and returning cash to shareholders, the beaten-down stock could wind up seeing strong rebound momentum over the next five years. On the other hand, there's another potential catalyst that could send the stock higher. PayPal might not be a stand-alone company five years from now Over the last year, reports have swirled suggesting that PayPal could be an acquisition target. With the company trading at just 10 times this year's expected earnings, the fintech player looks cheaply valued and could attract real interest from multiple prospective buyers. While the company has been facing some substantial competitive pressures, PayPal still has strong foundations and resources in the fintech space that could create strong synergies if folded into another fintech business or a technology company with a substantial focus on the consumer market. With that in mind, I think there's a very good chance that PayPal will be acquired within the next five years. Should you buy stock in PayPal right now? Before you buy stock in PayPal, consider this: The Motley Fool Stock Advisor analyst team just identified what they believe are the 10 best stocks for investors to buy now... and PayPal wasn't one of them. The 10 stocks that made the cut could produce monster returns in the coming years. Consider when Netflix made this list on December 17, 2004... if you invested $1,000 at the time of our recommendation, you'd have $385,972!* Or when Nvidia made this list on April 15, 2005... if you invested $1,000 at the time of our recommendation, you'd have $1,416,196!* Now, it's worth noting Stock Advisor's total average return is 951% -- a market-crushing outperformance compared to 214% for the S&P 500. Don't miss the latest top 10 list, available with Stock Advisor, and join an investing community built by individual investors for individual investors. See the 10 stocks " *Stock Advisor returns as of October 10, 2026. Keith Noonan has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends PayPal. The Motley Fool recommends the following options: short December 2026 $62.50 calls on PayPal. The Motley Fool has a disclosure policy.

PayPal Now Pays a Dividend and Buys Back Billions in Stock. Where Will It Be in 5 Years?

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