Meta is approving a $50 billion buyback and paying its first-ever dividend

Paresh Jadhav

11 months ago

Meta is taking steps toward becoming a dividend-paying tech giant with its earnings and share growth rocketing upward, as the market cap of over $1 trillion exceeds. Recently, they announced their first ever dividend and $50 billion buyback – joining companies like Apple, Microsoft, and Oracle who already pay them regularly.

Meta‘s move has sent shares soaring, rising 14% during after-hours trading Thursday. Furthermore, joining the ranks of tech titans that prioritize shareholder returns may make investors less nervous about its growth in the long run.

Meta has, until now, reinvested most of its profits back into its business by increasing technology platforms and hiring personnel. That strategy proved successful as Meta continued to surpass Wall Street expectations in terms of both revenues and earnings. Now however, with its dividend, Meta is maturing and acknowledging the need to return cash directly back to shareholders.

Notably, although the company will now pay out a quarterly 50-cent dividend (equaling 0.5% annually), it will still continue to invest heavily in its future. That includes making huge expenditures on its data centers in order to accommodate its generative AI products that create videos and images based on users’ input – something which will no doubt drive up operating expenses but at least will cost much less than investments into virtual reality or the “Metaverse” back in 2022.

Even with its costly plans for the future, this company has successfully reined in spending over the past year or so as it shifted into cost-cutting mode in response to an increasingly competitive digital advertising environment. That approach appears to have paid off: its operating margin increased from 32% in 2022 to 41% during its most recent quarter; it also brought on board top talent in artificial intelligence as it revamped data centers.

The company’s decision to start paying a dividend and expand its buyback program indicates their confidence in its future prospects compared to some of their peers who continue withholding capital back from investors despite strong financial performances and positive forecasts. This is an encouraging sign.

Meta’s dividend and buyback plan should prove interesting in the longer run, particularly if its success in attracting new investors searching for mature tech stocks is achieved. But it will take time before Meta can match Apple and Microsoft, who have been paying dividends for years and remain among the world’s most beloved technology stocks. While its dividend payout may draw in new buyers, it could also send signals to existing shareholders that Meta no longer wants to be perceived as the fast-growth tech powerhouse it once was.