By Nafeesah AllenFeatures correspondent
Getty ImagesFollowing an apology by Meta CEO Mark Zuckerberg at the US Senate online child safety hearing, Facebook announced its first dividend, set to benefit current shareholders substantially. Zuckerberg’s unexpected apology at the Senate hearing was followed by a surprise announcement: Meta will issue its inaugural dividend, which will undoubtedly result in significant gains for some shareholders. The company behind Instagram, Facebook, and WhatsApp attributed its 2023 business growth to the successful completion of data center initiatives, a significant workforce reduction of nearly 10,000 employees, and advancements in AI and the metaverse, as revealed in a Meta press release on 1 February. Zuckerberg’s coined “Year of Efficiency” in March 2023 appears to be yielding substantial rewards for shareholders. How much will Meta shareholders stand to gain?According to the February press release, Meta’s board of directors declared a cash dividend of $0.50 per share of Class A and Class B common stock. Shareholders as of the close of business on 22 February 2024 can expect to receive the first dividend payment on 26 March 2024. Subsequently, dividends will be distributed on a quarterly basis, subject to market conditions and the approval of the board of directors. The greatest impact of the payout will be felt by the company’s principal shareholders, including institutional investors such as the Vanguard Group and BlackRock, as well as individuals like Meta’s chief technical officer Michael Schroepfer and its chief revenue officer David Fischer. Zuckerberg himself, who reportedly owns around $350 million in Meta shares, stands to make an additional $175 million from the dividend, according to Time magazine.
Getty Images“This may pressure other public tech companies that are flushed with cash to do the same. Otherwise, these firms may lose investment dollars to companies like Facebook that offer one.” – John Pham, The Money NinjaWhat makes the Meta dividend noteworthy?Elizabeth Ayoola, a representative from NerdWallet specializing in investments, explains that “dividends are periodic payments in the form of cash or additional shares that companies make to their shareholders. They can offer a consistent source of passive income for individuals who have invested in these companies through stock ownership.” Meta providing dividends to shareholders presents an opportunity for investors to diversify their portfolios and generate passive income. “While the tech company may not be offering the highest dividends, there is potential for growth. If Meta continues its current pace of expansion, shareholders may see increased dividend payments in the future,” she notes.Kristy Chen, author of Quit Like a Millionaire and a prominent figure in the Financial Independence Retire Early (F.I.R.E.) movement, remarks that the decision to distribute dividends is unusual for a technology company. “They typically prefer to increase their share value through reinvesting profits and expansion…given Facebook’s enormous market capitalization, this move will benefit everyone from individual stock owners to S&P 500 index investors.” John Pham, founder of The Money Ninja, is among those who stand to benefit from the move. “I bought shares during Facebook’s IPO in 2012, so I’m just riding the wave,” he jokes. “This may pressure other public tech companies that are flushed with cash to do the same. Otherwise, these firms may lose investment dollars to companies like Facebook that offer one.”Will Meta’s actions have a domino effect?Is Meta pioneering a new approach or setting a precedent for other technology companies, particularly those involved in AI? Fazal Yameen, former Stash fintech executive, offers an informed opinion. “It’s evident that investors and the market are responding positively to this announcement, with shares increasing by 20% following the dividend declaration and $50 billion in stock repurchases. However, individuals considering investment at this stage should be aware that the impact of these two moves is already factored into the current stock price. Consequently, they may not experience immediate benefits,” he advises. Yameen asserts that Meta’s dividend is making a significant impact as it indicates the company’s maturation. “One of the primary grievances with the new wave of tech companies is their massive revenue generation without distributing any of it to their investors.” This recent dividend offering deviates from Meta’s customary strategy of maintaining substantial cash reserves for acquisitions or research and development. He expresses hope for an increase in the dividend rate in the future.“Indeed, 2024 is shaping up to be a fascinating year for equity markets,” says Shen. According to her, Meta’s dividend signals a potential challenge to other tech companies, particularly those driven by AI, to follow suit – consequently presenting greater prospects for AI to revolutionize the world as we know it.
