On Friday, Meta Platforms Inc. experienced a significant surge in its stock market value, adding over $214 billion, positioning its shares for one of their largest percentage increases since debuting on Wall Street in 2012. This spike followed the announcement of the company’s inaugural dividend and strong financial results.
Just before the 20th anniversary of Facebook, Meta announced a new authorization for $50 billion in share buybacks and declared a quarterly dividend of 50 cents per share, causing its stock to soar by as much as 23%, later stabilizing around a 21.7% increase.
According to Bloomberg, this increase represents the largest single-session market value boost, surpassing the $190 billion gains recorded by Apple Inc. and Amazon.com Inc. in 2022. Additionally, Meta has experienced the most significant one-day stock decline, with $232 billion lost on February 3, 2022.
Dividends are typically seen as indicative of mature, slower-growth companies. Meta joins a select group of major companies, known as the “Magnificent Seven,” to offer dividends, with a yield comparable to Apple’s at 0.5%, per LSEG data.
Investment analyst Dan Coatsworth of AJ Bell interpreted the dividend announcement as an attempt by Meta to revamp its image, though he regarded the payout as relatively minimal.
The dividend distribution is particularly beneficial for CEO Mark Zuckerberg, who holds about 350 million shares of Meta’s Class A and B stocks, potentially earning him roughly $175 million quarterly.
Meta reported significant advertising revenue and user growth rebound in its fourth-quarter results, leading to a 25% revenue increase. The company’s projections for the current quarter’s revenue also surpassed analyst expectations.
Efficiency improvements, including an 8% reduction in costs and expenses following the elimination of over 21,000 jobs since late 2022, enabled Meta to triple its net income to $14.02 billion.
Jasmine Enberg, a principal analyst at Insider Intelligence, highlighted the success of Meta’s “Year of Efficiency,” noting the company’s performance exceeded ad revenue expectations for 2023.
The introduction of a dividend may also broaden Meta’s appeal to investors, including those focused on dividend-paying stocks, making it more attractive compared to peers like Apple and Microsoft, which offer yields of about 0.5% and 0.7% respectively, as per LSEG data.
Brian Jacobsen, Chief Economist at Annex Wealth Management, noted that dividends could attract investors seeking more stable income.
Meta has been investing billions to enhance its computing capabilities for generative AI products across its platforms, including Facebook, Instagram, WhatsApp, and hardware like Ray-Ban smart glasses.
Meta’s shares are currently trading at a forward price-to-earnings ratio of 21, compared to other companies in the sector like Snap, Alphabet, Amazon, Microsoft, and Apple, showcasing the company’s valuation relative to its earnings expectations.
