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Those following Facebook parent Meta’s shares were in for a nice surprise today as the social media conglomerates shares surged by 14% following its fourth quarter earnings and a day after the U.S. Senate grilled its CEO Mark Zuckerberg for having “blood on his hands” from illicit material on his firm’s social media platform. The share price surge saw Meta investors reward the firm after it declared its first dividend in history even as global advertisement spending slowed down in a tough macroeconomic environment. Meta’s fourth quarter results saw it report a sizable 25% revenue growth that was accompanied by an equally strong 201% profit surge, and the dividend announcement came without any leaks to the press reporting about it prior to today’s earnings release.
Mark Zuckerberg Awards Investors With Juicy Dividend After Meta Profit More Than Doubles In Q4 2023
During Meta’s fourth quarter earnings call, Zuckerberg, like Alphabet chief Sundar Pichai, led his remarks by focusing on artificial intelligence. Like Google, Microsoft and Amazon, Meta is also a major player in AI, and the firm made news waves last month after Zuckerberg shared that his firm would buy hundreds of thousands of NVIDIA GPUs this year for his AI models.
Before his comments though, Meta had announced a 50 cent dividend for its Class A and Class B shares. As if this wasn’t enough of a surprise, the firm’s earnings release added that the dividend will be paid quarterly moving forward. This necessitated Wall Street to re-calibrate Meta’s shares, and during aftermarket trading, its management was rewarded with a nice 14% share price surge.
Based on Meta’s latest regular hours closing price of $394.78, a 50 cent dividend lends it a 50 basis point (0.50%) dividend yield, which is quite modest when compared to some other firms. The stock’s payout ratio is 13.4% on an annualized basis.
Speaking of growth, Zuckerberg shared that Meta’s goal will be to build the most popular and most advanced A.I. products and services. The motivation behind this is to proliferate A.I. to broad use cases that allow creators, businesses and developers have access to A.I. models to meet their needs. The Facebook chief also admitted that being “leaner” is helping Meta focus on keeping up with its peers in the A.I. race.
Commenting on the firm’s surprise dividend announcement, Meta chief financial officer Susan Li responded during the firm’s fourth quarter of 2023 earnings call:
Returning capital to shareholders remains an important priority for us. And we believe introducing a dividend really just serves as a nice compliment to the existing share repurchase program. The dividend doesn’t change how much we will be, or it doesn’t change the way we determine the total amount of capital we’ve returned. And, we expect that share repurchases will continue to be the primary way that we return capital to shareholders. But, introducing a dividend just gives us a more balanced capital return program and some added flexibility in how we return capital in the future.
Zuckerberg also admitted that Meta actually “underbuilt” its GPU clusters for Reels, and as part of the process of building capacity, he realized that Meta should build enough capacity to support Reels and a “Reels sized A.I. service” so that Meta would not have to face a capacity shortage in the future. Training and operating future models will be more “compute intensive” stated Zuckerberg, but the expectations for their size and capacity are still uncertain.