The parent company of Facebook will distribute payments to shareholders as it announces $40 billion in revenue for the last quarter
Mark Zuckerberg, CEO of Meta, the parent company of Facebook, Instagram, and WhatsApp, is projected to receive $700 million (£549 million) annually in dividends.
Meta revealed on Thursday that it would issue its inaugural quarterly dividend to investors since Facebook went public in 2012, following its surpassing of Wall Street estimates with $40 billion in revenue for the last quarter of the previous year.
Despite Meta reducing its total headcount to about 19,000 by cutting 22% of staff, the company reported a threefold increase in quarterly profits to $14 billion, driven by a rebound in advertising sales. Additionally, Meta launched a $50 billion share buyback.
Zuckerberg also revealed that Meta, celebrating its 20th anniversary this month, will issue its inaugural dividend as a public company, amounting to 50 cents per share. Meta stated that the $1.25 billion in payouts to investors would mark the beginning of regular dividends.
Zuckerberg owns approximately 350 million shares, which means that if Meta maintains similar dividend payouts each quarter, he could receive around $700 million in the first year under this policy.
In 2022, the 39-year-old received a total compensation of $27 million, based on the most recent year for which complete remuneration figures are available.
Investors have welcomed the decision to initiate dividend payments. When Wall Street opened on Friday, Meta’s share price surged by 20%, resulting in a valuation of over $1.2 trillion. However, some analysts have questioned the rationale behind the company’s decision to take this step.
The decision is unexpected considering Meta has indicated a significant need for investment in AI-related infrastructure, and its metaverse project continues to consume cash without showing signs of profitability for years to come,” said Dan Coatsworth, an investment analyst at AJ Bell. “Initiating a dividend suggests that the company aims to revamp its reputation and be taken more seriously.”
However, Coatsworth noted that it is a “symbolic gesture,” as the dividend amounts to $2 per share, translating to a mere 0.4% yield for an investor based on Meta’s $461 share price.
“That’s unlikely to attract a new segment of investors seeking income opportunities,” he remarked. “In fact, it’s the type of yield that most investors tend to overlook.”
Coatsworth also mentioned that although the company has stated that share buybacks will continue to be the primary method for returning capital to shareholders, introducing dividend payments is a means to demonstrate that the tech industry has achieved mainstream maturity, similar to the oil, gas, banking, and pharmaceutical sectors.
“Companies begin paying dividends when they are more mature, possibly after they have successfully commercialized an idea and are experiencing a steady growth in sales and profits,” he explained. “Meta already operates a well-established social media network business with substantial advertising revenue, so one could argue that the dividend could have been introduced much earlier.”
Meta faced criticism during a US Senate judiciary committee hearing on Wednesday, where Zuckerberg and other tech executives were questioned about their platforms’ effects on young users. The CEO expressed sympathy for parents who had lost children due to online exploitation.
During the hearing, lawmakers discussed potential legislation that could remove Meta and other platforms’ legal immunity for content posted on their platforms. This development comes after Meta was sued by the attorneys general of 41 states over its impact on young users.
Additionally, New Mexico’s attorney general has filed a lawsuit against the company, alleging failure to prevent child sexual exploitation and trafficking.