Meta Leads the Way
Dividends fell out of favor as a popular strategy for returning value to shareholders for a while. Instead of dividends, many businesses opted to buy back stock, make strategic acquisitions, or reinvest earnings into new business ventures. But dividends might be making a comeback.
Meta Platforms (META) just issued its first quarterly dividend ever. The market responded positively to this perceived sign of the social media company’s maturity, sending its share price soaring on the news.
A Shift in the Market
High interest rates due to the Federal Reserve’s inflation-fighting policy decisions have caused companies to reevaluate their stance on dividends. Higher rates have meant investors could enjoy higher returns in other investments, such as money-market funds.
As a result, both companies and investors are starting to favor dividends again. Last year, S&P 500 firms paid out $588 billion in dividends, up 22% from three years ago.
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