Meta Platforms (META -2.41%) stock has surged this year, rising more than 35%. This adds to the stock's 194% gain last year as shares recovered from getting slammed in 2022.

Why is Wall Street scrambling to buy Meta stock? Among other things, the social network specialist's accelerating revenue growth, improving earnings, a huge share repurchase program, and a recently announced dividend. Here's a closer look at how the company's strong financial momentum has management returning heaps of cash to shareholders.

A strong backdrop for a quarterly dividend

Reviewing Meta's financials shows that the company probably could have been paying a dividend for quite some time. Sure, Meta's free cash flow, or its cash flow left over after regular operations and capital expenditures are taken care of, took a huge hit in 2022, declining more than 50% year over year. But free cash flow for the year was still at $19 billion.

To management's credit, Meta did return capital to shareholders during 2022, albeit indirectly through share repurchases. The company repurchased $31.5 billion worth of its own stock.

So you can't say that Meta has been stingy with its cash. On the contrary, it has been aggressively returning it to shareholders. It just wasn't paying a dividend -- yet.

The company's 2023 results probably solidified management's confidence in paying a dividend. Free cash flow didn't just recover but hit a record high of nearly $44 billion for the year. Additionally, the company's cash and marketable securities swelled to $65.4 billion by the end of 2023. This mountain of cash was far in excess of its $18.4 billion of debt -- a debt load that could be eliminated quickly if management wanted to, using less than half of the company's annual free cash flow.

All of this strong cash flow was supported by impressive top-line momentum as the company's revenue-growth rates started accelerating. Revenue in the company's fourth quarter rose 25% year over year -- much better than the 4% year-over-year decline Meta reported in the year-ago quarter.

The icing on the cake? Meta grew its total 2023 revenue 16% while its operating costs and expenses increased just 1% year over year. Talk about operating leverage! This disciplined cost control as part of what management called the "year of efficiency" helped fuel even more powerful cash generation.

Meta is a cash cow that should be paying a dividend. Even more, the company has the cash flow to both repurchase lots of stock and pay a quarterly dividend -- and that's exactly what management is doing.

Meet Meta's dividend

Against that backdrop, in February, Meta announced an arguably overdue quarterly dividend of $0.50 per share. This equates to $2 annually, giving Meta a dividend yield of 0.4%.

The first quarterly dividend will be paid on March 26 to shareholders of record on Feb. 22.

Commenting on this new dividend, Meta Chief Financial Officer Susan Li said it's a further extension of management's prioritization of returning capital to shareholders. It "really just serves as a nice complement to the existing share repurchase program," Li noted during the company's fourth-quarter earnings call. It gives Meta "a more balanced capital return program and some added flexibility in how we return capital in the future."

Given the company's significant free cash flow and its war chest of cash, this dividend payment will likely grow over time. But management said it expects to prioritize share repurchases over its dividend. Indeed, the company also said in February that it authorized an additional $50 billion for share repurchases -- and that's on top of the approximately $31 billion it had left in its previous authorization, as of the end of 2023.