Shares of Meta Platforms (META 0.43%) rose by 25.6% during February, according to data provided by S&P Global Market Intelligence. The majority of the upward move occurred on Feb. 2, the day after the company reported financial results for the fourth quarter of 2023 and initiated a quarterly dividend for the first time.
At the start of the year, Meta Platforms' co-founder and CEO Mark Zuckerberg dubbed 2023 the "year of efficiency," meaning he was pushing the company toward robust improvements to profitability. The company delivered in dramatic fashion. It earned over $39 billion in net income in 2023, which was good for a stellar net profit margin of 29%.
It didn't just hit $39 billion in net income -- Meta Platforms grew the top line as well. In 2023, the company's revenue had a 16% year-over-year increase. Rates for its ads had a modest improvement whereas ad impressions were up big time, partly thanks to strong engagement from its still-growing user base.
Meta is balancing two important things
Meta is rewarding shareholders more than ever thanks to its efficient year. The company is authorized to repurchase over $80 billion in stock at management's discretion. And as mentioned, it will pay its first quarterly dividend on March 26 at a rate of $2 per share annually.
As Meta's largest shareholder, Zuckerberg is the biggest beneficiary of this dividend decision and is expected to earn roughly $700 million in annual dividend income.
Meta is returning some profits to shareholders, which is good. But it should be pointed out, however, that the company isn't simply squeezing its business for every penny of profit that it can. To the contrary, it still had a $16 billion operating loss in its Reality Labs business segment -- a part of the business trying to develop its metaverse aspirations.
Whether investors believe this is money well-spent is beside the point. Meta is still spending on growth while rewarding shareholders with profits -- an important balance to strike.
What's ahead now
For the first quarter of 2024, Meta expects revenue growth of at least 20%. That's significant for a company this big and it's an encouraging number.
Granted, Meta expects big increases to expenses as well in 2024. Specifically with its Reality Labs business segment, management said it expects its segment operating loss "to increase meaningfully."
I believe this is why Meta's dividend is so important here. Yes, the company's profit margins could decrease in 2024 compared to 2023. But management is showing a commitment to balance -- it will invest in the business while still rewarding shareholders. The quarterly dividend is a commitment to this. And that should be exciting for Meta's shareholders today.
