Will Facebook Ever Pay A Dividend?

Income investors might be reluctant to even consider buying shares of a company that does not pay a dividend. Of the 500 stocks in the S&P 500 Index, nearly 90 do not currently pay dividends to shareholders. You can see the entire list of S&P 500 stocks here.

On the other hand, capital allocation decisions are not written in stone. Companies that do not currently pay a dividend could initiate a dividend at some point in the future if the underlying fundamentals support a payout to shareholders and management is willing to do so.

We believe that even though tech giant Facebook Inc. (FB) does not offer a dividend at the present time, it could begin a dividend in time, perhaps sooner than many investors think.

Business Overview

Facebook is a social media giant, with a market capitalization of $522 billion. Facebook is the unquestioned leader in social media. At the end of the most recent quarter, Facebook had 1.56 billion active daily users and 2.38 billion active monthly users.

Its family of offerings also includes Instagram, WhatsApp, and Messenger. Facebook estimates that 2.7 billion people use at least one of their services.

Facebook began as many startups do, with rising revenue but a lack of profitability. However, all that changed when the company effectively monetized its massive user base. Facebook and its various properties represent massive advertising platforms.

And, given the amount of time users spend on the site, Facebook is simply a gold mine for advertising potential. Mobile advertising revenue represents approximately 93% of total advertising revenue.

(Click on image to enlarge)

FB Advertising Revenue

Source: Earnings Presentation

The result is that Facebook is now enormously profitable. Last year was an incredible one for the company. Revenue increased 38% in 2018, to over $55 billion. Diluted earnings-per-share increased 40%, to $7.57. Total costs and expenses increased 51% in 2018, outpacing revenue growth for the year. While this caused operating margin to contract by five full percentage points, Facebook made up for this with a huge drop in its effective tax rate from 23% to 13% last year.

1 2 3 4
View single page >> |

Disclaimer: Sure Dividend is published as an information service. It includes opinions as to buying, selling and holding various stocks and other securities. However, the publishers of Sure ...

more
How did you like this article? Let us know so we can better customize your reading experience. Users' ratings are only visible to themselves.

Comments

Leave a comment to automatically be entered into our contest to win a free Echo Show.