FACEBOOK: Some people will get very rich from Facebook's first payment

Mark Zuckerberg, CEO of Meta, declared Facebook's first dividend after apologising before a US Senate hearing on internet kid safety; this decision has the potential to enrich shareholders.

Mark Zuckerberg unexpectedly apologized during the recent Senate hearing on online kid safety. A few days later, he made another unexpected statement: Meta would distribute its first dividend, resulting in substantial wealth for some stockholders.

The technology conglomerate owns Instagram, Facebook, and WhatsApp. In a press statement on February 1st, Zuckerberg credited the company's growth in 2023 to the successful completion of data centre projects, a reduction in workforce of around 10,000 people, and progress made in artificial intelligence and the metaverse. Meta's "Year of Efficiency," a term invented by Zuckerberg in March 2023, yields significant benefits for stockholders.

What is the potential profit for Meta shareholders?

As stated in the February press release, Meta's board of directors announced a cash dividend of $0.50 per share for both Class A and Class B common shares. Stockholders who retain shares until the end of business on February 22nd, 2024, may anticipate receiving their first dividend payment on March 26th, 2024.

Subsequently, dividends will be disbursed every quarter, subject to the approval of the board of directors and prevailing market circumstances. The pay-out will primarily benefit the company's major shareholders, including prominent institutions like the Vanguard Group and BlackRock, as well as notable individuals such as Meta's chief technical officer, Michael Schroepfer, and its chief revenue officer, David Fischer, as reported by Investopedia. According to Time, Zuckerberg, who has about $350 million worth of Meta shares, anticipates earning an additional $175 million from this payout.

What makes the Meta payout so unique?

According to Elizabeth Ayoola, an investment representative at Nerd Wallet, dividends refer to regular payments made by firms to shareholders, which may be cash or extra shares.

Investing in such firms via stocks may provide individuals with a reliable and continuous income stream. Meta's dividend distribution to shareholders gives customers an advantage to broaden their investment portfolio and generate passive income. "Although the technology company is not currently distributing the highest dividends, there is a possibility for future expansion."

"If Meta continues expanding at its present rate, consumers may anticipate augmented dividend disbursements in the future," she asserts.

Kristy Chen, a prominent figure in the financial independence retire early (F.I.R.E.) movement and author of Quit Like a Millionaire, asserts that giving dividends is atypical for a technology business. "Facebook's strategy of increasing their share price primarily involves reinvesting their profits and expanding their operations. This approach is particularly effective due to Facebook's substantial market capitalization. As a result, both individual stockholders and S&P 500 index investors will reap the rewards." 

John Pham, who established The Money Ninja, is among the stockholders. "I purchased shares during Facebook's initial public offering (I.P.O.) in 2012, so I am currently benefiting from the positive market trend," he chuckles. "This may compel other publicly traded technology companies with a surplus of funds to take similar actions." Alternatively, these businesses risk losing investment funds to competitors like Facebook, who provide a similar service.

Will Meta's move reverberate?

Is Meta deviating from the norm or setting an example for other technology businesses, especially those involved in artificial intelligence?

Fazal Yameen, a former executive at Stash fintech, makes an informed estimation. "Investors and the market have expressed great enthusiasm for this decision, as evidenced by the 20% increase in share value following the dividend announcement and $50 billion worth of stock repurchases." However, potential buyers should be conscious that the impact of those two actions has already been included in the stock prices. Therefore, considering the significant increase in the stock price, it is unlikely that you would see immediate advantages from them.

Yameen asserts that Meta's dividend is causing a significant impact since it indicates to the market that the firm is maturing. "A significant criticism of the recent surge of technology companies is that despite generating billions of dollars in revenue, they have not allocated any of it to their investors." The distribution diverges from Meta's usual practice of maintaining substantial financial reserves to acquire other firms or finance research and development. He anticipates that Meta will raise the dividend rate in the future.

"2024 is proving to be a highly intriguing year for equity markets," remarks Shen. Meta's dividend challenges other technology businesses, especially those focused on artificial intelligence, to follow suit. This also signifies a more significant opportunity for AI to revolutionise the world.