Formerly known as Facebook, Meta revealed it was launching its first ever dividend at 50 cents (39p) a share in its annual results on 1 February.
The company also unveiled a $50bn (£39bn) share buyback programme on the same day.
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Both announcements spurred a rally in the company’s shares, rising by more than 15% on the day and adding more than £110bn to its valuation.
Since then, the stock’s share price has remained elevated, according to Nasdaq data, hovering around the $460 per share mark.
While the dividend offering was well received by markets, managers of income funds targeting high yields said Meta would not be useful in this regard.
“It is a very low yield at the current dividend,” said Ben Lofthouse, manager of the Henderson International Income trust.
Richard Saldanha, global equity fund manager at Aviva Investors, said while the dividend was “sizeable in total dollar terms”, it represents less than 0.5% dividend yield.
“So it still remains relatively low versus stocks that are traditionally held in income funds,” he said.
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Saldanha argued the news did not mean Meta would “suddenly be considered a ‘dividend stock'”, agreeing with Lofthouse that “there are lots of stocks with higher yields already in the US market”.
Peter Magee, investment management director at Evelyn Partners, viewed the news as “positive” but “not because we think that the company is suddenly going to become a meaningful income payer”, rather that it sent a signal to investors about management’s capital allocation priorities.
“For the last 18 months, investors have fretted about the extent of Meta’s investment in its Metaverse project,” he said.
“By committing to a quarterly dividend, alongside the company’s pre-existing buyback programme, Meta will now be allocating roughly two-thirds of its free cash flow to shareholder returns.”
Magee noted this came at a point when Meta shareholders were being asked to fund the company’s expensive capex programme.
“[This] should therefore help to redress concerns that shareholder returns are not front and centre of management’s thinking,” he said.
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James Carthew, head of investment companies at QuotedData, pointed out that while the dividend may not necessarily be useful for helping portfolios hit their dividend targets, it could “potentially attract the attention of investors who, for whatever reason, have a rule of not buying stocks without a yield”.
“In that category, we would find Bankers Investment Trust, which after agonising about missing the price gains on the big tech stocks last year because of this rule is pondering whether to scrap it,” he said.
When asked if the move announced Meta’s transition from hyper-growth tech stock to a mature company, Carthew argued it was not necessarily a watershed moment.
“Largely, it is a question of perception. Why has Meta not got enough exciting growth opportunities to spend its spare cash on? There are questions about whether a stock that big can continue to maintain an above average growth rate, one that markets have dismissed for now given the excitement around AI, but one that could return,” he added.
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