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Meta Breaks The Mold: Time For Tesla, Amazon And Alphabet To Join The ‘Magnificent Seven’ Dividend Party?

Veteran Trader Peter Brandt Asks Macro Guru If Bitcoin Bull Has Finally Awoken From Deep Slumber

Meta Platforms, Inc. (NASDAQ:META) announced on Thursday its initiation of a quarterly cash dividend, with a maiden dividend of 50 cents per share scheduled to be paid on March 26 to Class A and Class B shareholders of record as of Feb. 22. This declaration contributed to a 15% surge in Meta shares during after-hours trading.

What’s Behind The Dividend? The decision to offer a dividend comes nearly 12 years after Meta, previously known as Facebook, conducted its initial public offering on May 18, 2012, at a price of $18 per share. 

A dividend, being an optional shareholder return, is at the discretion of the company’s board. It represents a fixed payment distributed to shareholders in proportion to their shareholdings, excluding loss-making companies.

Typically, companies pay dividends to attract income-oriented investors seeking a stable income stream to navigate stock market uncertainties. However, growth-focused investors often favor companies that reinvest profits into promising projects for better long-term growth. Tech companies, particularly those in high-growth sectors, often refrain from paying dividends based on this rationale.

Analyzing the reasons behind Meta’s dividend decision, Future Fund‘s Gary Black noted that the company closed the quarter with $64.5 billion in cash and generated $43 billion in free cash flow in 2023. He estimated that a $2 per share dividend would consume approximately $5 billion annually from its cash reserves. Black compared Meta’s revenue growth to Tesla, Inc. (NASDAQ:TSLA), pointing out that Meta’s 2024 guidance of 25%-34% growth exceeded the consensus estimate of 18%-20%, while Tesla was forecasted for over 16% growth.

Black stated, “META’s $43B in FY’23 FCF and $65B cash position convinced the $META Board to initiate a $2/share dividend and add $50B to the buyback.”

In addition to the dividend announcement, Meta revealed a new repurchase authorization of $50 billion in shares, supplementing the $30.93 billion pending from a prior authorization.

See Also: Best High Dividend Paying Stocks

‘Mag 7’ Dividend Payers & Hold-Outs: Meta now joins the ranks of “Magnificent 7” counterparts, such as Apple, Inc. (NASDAQ:AAPL), Nvidia Corp. (NASDAQ:NVDA), and Microsoft Corp. (NASDAQ:MSFT), in adopting a dividend…

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