Shares of Facebook and Instagram-owner Meta Platforms (META:NASDAQ) soared as the social media company reported blowout fourth quarter results (1 February) that beat even the most optimistic projections and unveiled a maiden dividend.

By the end of the Wall Street session on 2 February, the stock had rallied more than 20% to record its highest close ever, at $474.99. According to Bloomberg, that rough $200 billion one-day surge is the biggest in stock market history.

It represents a remarkable turnaround for Meta. It was only a couple of years back the social media giant suffered the single biggest one-day value destruction in stock market history, when an estimated $250 billion was wiped off the firm’s market cap.

But Meta has come a long way since then, dazzling shareholders with yet another impressive quarterly earnings report as the social media giant focuses on cutting back costs and shoring up billions in profits.

The fourth quarter 2023 numbers were impressive. It reported $5.33 of earnings per share on $40.1 billion revenues, figures that beat consensus estimates of $4.96 and $39 billion respectively. Revenues represented 17.6% growth over the previous quarter (to end September) and 24.5% year-on-year growth.

Yet, arguably, the outperformance did not shock investors as much as the surprise introduction of its first ever shareholder dividend. Meta said it would pay investors a quarterly dividend for the first time, announcing a payout of $0.50 a share on 26 March. That comes after cash and equivalents swelled to $65.4 billion at the end of 2023, from $40.7 billion a year earlier. Meta also announced a $50 billion share buyback.

It is perhaps this disciplined capital allocation that has most impressed investors during a period of stunning share price appreciation. In 15 months, the stock has soared from $91, gains of more than 400%.  

Analysts have now raised the question of whether Meta’s emergence as a dividend payer will place greater pressure on other so-called ‘Magnificent Seven’ stocks to follow suit. 

Apple (AAPL:NASDAQ), Microsoft (MSFT:NASDAQ) and even Nvidia (NVDA:NASDAQ) already pay dividends, while Amazon (AMZN:NASDAQ), Alphabet (GOOG:NASDAQ) and Tesla (TSLA:NASDAQ) may be able to bat off these pressures so long as they are delivering above average returns on capital, currently calculated at 26%, 10% and 11% respectively.

Meta’s return on capital is reported at 23.7%. 

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