Meta Authorizes $50 Billion Stock Buyback and Pays Dividend

Meta has authorized a massive $50 billion stock buyback, a move that's sure to send shockwaves through the market.

This significant decision was made to return value to shareholders, a key goal of the company.

Meta's board of directors has given the green light for the buyback, which will be executed over the next several years.

The company plans to use some of its existing cash reserves to fund the buyback, which will help to boost its stock price.

For more insights, see: Meta Etfs

Meta will pay a quarterly dividend of 50 cents per share, its first ever. The dividend will be paid in March to all shareholders of record as of February 22.

The company has also authorized a $50 billion share buyback program, which is equivalent to about 5% of outstanding shares, based on Meta's $1 trillion market cap.

Here are the key details of the buyback program:

Meta's share buyback program is a significant move, and it's worth noting that the company has been buying back stock for years, with $44.5 billion in stock repurchased in 2021.

Meta has announced its first-ever dividend, a 50 cent payout per share, to be paid quarterly. The company will pay the cash dividend on a quarterly basis, subject to market conditions.

Meta's market capitalization is a whopping $1 trillion, and the $50 billion share buyback is equivalent to about 5% of shares outstanding. The expanded authorization is a significant move, allowing the company to return capital to shareholders in a more balanced way.

The dividend will be paid in March to all shareholders of record as of February 22. This marks a new chapter in Meta's capital return program, giving the company added flexibility in how it returns capital to investors.

Meta's Chief Financial Officer, Susan Li, stated that introducing a dividend gives the company a more balanced capital return program and added flexibility in how it returns capital in the future.

Meta's 2021 stock repurchase program was a notable event, but it's essential to understand the context. The company repurchased $44.5 billion in stock that year.

The share price was at all-time highs before the 2022 bear market struck, which is not ideal for buying back stock. In an ideal situation, a company should deploy more cash to buy back stock when the share price is low and less when it's high.

Meta still reduced its overall share count in 2021, effectively increasing the size of the pie for remaining shareholders. This was a positive outcome, but the company could have been more judicious with its cash deployment.

The company grossly overpaid and blew through a lot of cash for share repurchases in 2021, viewed through this lens. This might make investors question the company's strategy.

Curious to learn more? Check out: Accounting for Share Buy Back at Premium

Share repurchases are a way for companies to share profits with shareholders by buying back their own stock from the market, reducing the number of outstanding shares.

Companies can choose between paying a cash dividend or using share repurchases to share profits with shareholders.

By reducing the number of outstanding shares, each remaining share becomes more valuable because there are fewer shares to spread the company's profits across.

Meta's management has been aggressive with repurchases over the past two years, resulting in a 7% decrease in outstanding shares over the past five years.

Fewer outstanding shares lead to higher earnings per share (EPS) because the same net income is now spread across fewer shares.

Meta's net income grew by 134% over the past 12 months, but EPS grew by 156%, showing the impact of share repurchases on EPS growth.

Explore further: What Are Shares in Stocks

Meta's plans to repurchase shares have been quite effective, especially considering the company's current financial situation. Meta's price-to-earnings (P/E) ratio has fallen to just 12, less than the historical average of the S&P 500.

The company is struggling with less effective ads due to Apple's iPhone privacy changes, but it's still generating a significant amount of free cash flow. In fact, Meta gets $0.33 of free cash flow from every revenue dollar.

Meta's share repurchases have been aggressive, with the company buying back another $5 billion worth of shares in the second quarter. This is on top of the $24 billion remaining on its authorized plan.

If you believe in Mark Zuckerberg's leadership, these share repurchases will look like a gift to shareholders in hindsight. With another 5% of shares set to disappear over the coming quarters, it's clear that Meta is committed to this strategy.

Here are some key statistics to keep in mind:

Meta's dividend policy is also worth noting. The company will pay a quarterly dividend of 50 cents, its first ever, and has authorized a $50 billion share buyback program.

If this caught your attention, see: Stock Buyback vs Dividend

Meta's Financial Performance is a crucial aspect to understand when evaluating the company's stock buyback plan. Meta spends more money on share repurchases than many companies.

The company's struggles in its advertising business post-iOS privacy changes have indeed clouded sentiment for Meta, but this could eventually prove beneficial to shareholders.

Meta Platforms is a social media conglomerate that spends more money on share repurchases than many companies.

Meta's struggles in its advertising business post-iOS privacy changes have clouded sentiment for the company, but this could eventually prove beneficial to shareholders.

Meta's massive share repurchases tell you what it thinks of its stock price, and it's clear the company is confident in its future prospects.

Meta's share repurchases are a smart move, especially during a downturn. The company bought back another $5 billion worth of shares in the second quarter and has another $24 billion remaining on its authorized plan.

The share price remaining stable means that another 5% of shares will disappear over the coming quarters. This could be a gift to shareholders in hindsight, especially if Meta figures things out over the long run.

CEO Mark Zuckerberg and the company are working through the challenges posed by Apple's iOS changes. They're also dealing with Reality Labs being unprofitable for the foreseeable future.

Related reading: How Does Selling Shares on the Stock Exchange Benefit Companies

Meta is being prudent and trying to do right by its investors. They're reducing the total share count by 5% and buying back shares at discounted prices, which is a great use of free cash during a bear market.

In 2022, the company repurchased $28 billion worth of shares and reduced the total share count by 5%. Those shares were bought at discounted prices, especially in comparison to Meta stock now.

The pace of repurchases ticked up again in the first quarter, totaling $9.22 billion. This is a continuation of their smart strategy to return cash to shareholders.