Meta Platforms (NASDAQ:META), the tech giant behind Facebook, has made headlines with a remarkable surge in stock price following impressive earnings, surpassing analysts' expectations, and the announcement of a dividend.
In the fourth quarter, Meta reported an adjusted earnings per share of $5.33 on revenue of $40.11 billion, eclipsing Bloomberg consensus estimates. The announcement of a $50 billion boost to its stock buyback authorization, coupled with the initiation of a quarterly dividend of $0.50 per share, marks a significant shift in the company's strategy towards rewarding shareholders directly. On an annual basis, the company would be paying $2 per share in dividends, resulting in a yield of around 0.4%.
However, despite these positive indicators, there are factors that potential dividend investors should consider. Meta's Reality Labs division, dedicated to realizing CEO Mark Zuckerberg's vision for the metaverse, reported a loss of $4.65 billion. This continued investment in long-term, speculative ventures indicates Meta's willingness to endure significant financial burns to achieve future ambitions. Meta's strategic pivot towards generative AI, though promising, could also add more expenses and losses later on.
While the initiation of a dividend is a positive step, it may not become a significant income source for investors in the near term. Tech stocks are not often known to be high-yielding investments and I’m doubtful that Meta will end up that way, either. Ultimately, there are better options out there for dividend investors to consider. Over the past year, however, Meta has been one of the hottest growth stocks to own, rising 194% in 2023.
