In This Article:
Meta announced its first-ever quarterly dividend of $0.50 per share alongside a new $50 billion share buyback program.
Yahoo Finance's Julie Hyman and Jared Blikre explain what a dividend is, why Meta's is so significant coming out of the tech giant's earnings, and what it could signal for the company's path forward.
For more expert insight and the latest market action, click here to watch this full episode of Yahoo Finance Live.
Editor's note: This article was written by Eyek Ntekim
Video Transcript
JULIE HYMAN: Meta making headlines with the announcement of its first-ever dividend. The news along with the company's strong earnings and guidance sending shares soaring toward a record high in today's trade. Meta is now on track to add $200 billion to its market cap. That would be the biggest single-day addition for any company on record. So why did this dividend announcement hype up investors so much? Let's take a step back and cover the basics.
What is a dividend? Is the first thing we want to talk about. It's a regular payment made by a company to the folks who own the stock. Meta's dividend is going to be paid quarterly at $0.50 a share. It's considered a vote of confidence from CEO Mark Zuckerberg. And he's set to be himself the biggest beneficiary.
JARED BLIKRE: Owns a lot of shares and he holds roughly $350 million shares of Meta. So his payout is about $175 million each quarter. That's before taxes. And that's about $700 million every single year, assuming that dividend stays the same. This move is also notable because big tech doesn't necessarily do dividends. And this has been the case throughout history, although some of the bigger ones, they do end up doing that. Companies with extra cash generally have three options of what they can do with it.
Number one, they can reinvest it in the business doing research and development, buying equipment or factories, hiring new workers. Number two, they can make an acquisition or acquisitions. Three, they can pay out some of that cash to shareholders, either as a dividend or by buying back their shares, which reduces the number of shares outstanding and it boosts the value for the existing shareholders. It's basically an extra reward for owning the stock.
And Julie, we were talking about, not only is there a dividend here, it's a $50 billion buyback announcement. But that's not the first $50 billion announcement that they've done before, they actually did one two years ago in 2021.
JULIE HYMAN: Yeah. It was that the 1, 2 punch of that with the dividend that really caused so much enthusiasm. But in fact, only three of the Magnificent Seven stocks pay out dividends right now. Most of them have historically chosen options 1 and 2. Either they spend their cash on the business or to buy other businesses. Or in the case of Apple, they also just have a lot of cash left over that sits around. But Meta's move does send a message.