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Despite Huge Cash Piles, Facebook, Amazon, Google Are Unlikely To Pay Out Dividends Anytime …

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Three of the most dominant tech companies in the world — Facebook, Amazon and Google parent Alphabet — have never paid a dividend to shareholders, instead choosing to use their available capital to generate high growth through acquisitions and investing in internal businesses, but may be compelled to once they mature and growth slows.

Big Tech CEOs testify before Congress on battling misinformation

MARCH 25th 2021: Facebook CEO Mark Zuckerberg, Google (Alphabet Inc.) CEO Sundar Pichai and Twitter … [+] CEO Jack Dorsey testify before the United States Congress on combating online misinformation and disinformation. – File Photo by: zz/John Nacion/STAR MAX/IPx 2020 10/14/20 Google offices in Chelsea, Midtown Manhattan, New York City on October 14, 2020 during the worldwide coronavirus pandemic. (NYC)

zz/John Nacion/STAR MAX/IPx

Key Facts

Facebook, Amazon and Google parent Alphabet have amassed a combined cash balance of more than $290 billion as of the end of last year, but have paid no dividends to shareholders.

In its most recent annual report, Facebook explicitly stated that “we do not expect to declare or pay any cash dividends in the foreseeable future” and that it will continue to retain earnings to finance its businesses; while in its latest annual report, Alphabet said it will continue to use capital “to invest for the long term growth of the business.” 

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Dryden Pence, chief investment officer at Pence Wealth Management of Newport Beach, Calif., told Forbes that Facebook, Alphabet and Amazon are still in their “hyper growth phase” and are using their cash to acquire other firms or invest in their businesses such as Amazon’s one-day shipping service or Google’s effort to expand its data center footprint.

Pence added that while introducing a dividend would attract investors looking for yield it “isn’t exactly the best use of their money at this juncture in their growth cycle.”

David Bahnsen, chief investment officer at The Bahnsen Group, a wealth management firm based in Newport Beach, Calif., told Forbes he thinks Facebook, Alphabet and Amazon will ultimately pay dividends, but perhaps “many years from now” when they realize “shareholders have to be monetized.”

Andrew Graham, managing partner of Jackson Square Capital, an investment advisory firm based in San Francisco, told Forbes that paying dividends would only benefit Facebook, Alphabet and Amazon when growth from their core businesses slows, M&A opportunities are limited and investors demand shareholder returns (in the form of dividends or buybacks) instead.

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Key Background

Pence said that while there have been exceptions, like Broadcom, which has raised its dividend consistently for several years despite double-digit growth revenue growth, tech companies are more likely to pay dividends later on in their growth cycles rather than early on.  But the biggest tech firm of all, Apple, has had an erratic dividend history. Apple paid dividends consistently from 1987 to 1995, when the company found itself strapped for cash. Seventeen years later in 2012, flush with cash from sales of a host of wildly popular products but with annual revenue growth plateauing, Apple restarted paying dividends again. Other tech giants started paying dividends fairly recently. Microsoft began paying in January 2003, Cisco did not begin until March 2011, and Intel only began last September.

Surprising Facts

Howard Silverblatt, senior index analyst at S&P Dow Jones Indices, told Forbes that 82.4% of the companies in the S&P 500 information technology sector (which includes Apple, Microsoft, Intel and Cisco) currently pay a dividend. (However, Facebook and Alphabet are in S&P’s communications services sector, while Amazon is in consumer discretionary.) Overall, however, the percentage of S&P 500 companies paying dividends has been falling – as of the first quarter of 2021, 385 stocks, or 76.2%, in the index paid a dividend, the same as in the fourth quarter of 2020, but down from the 413 which were paying in first quarter of 2020. That decrease is partly attributable to the pandemic which prompted some companies to preserve cash and suspend dividends last year.

Tangent

Pence noted that since investors that own Facebook, Alphabet, and Amazon are buying them because they are dominant companies with exceptional growth numbers – these companies are likely better off repurchasing stock to pump up share prices. Indeed, he notes that Facebook has authorized $34 billion in stock repurchases since 2015 while Alphabet has authorized $80 billion. 

Further Reading

How Do Dividends Work? (Forbes)

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How To Score Big With Dividend Stocks In 2021 (Forbes)

20 Dividend Stocks That Could Double In 2021 (Forbes)

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Facebook-Meta Earns the ‘Worst Company of 2021’ Title in This Survey

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Facebook has had its share of controversies this year. The company was under more scrutiny after whistleblower Frances Haugen leaked a series of internal documents.

Facebook parent Meta has been named the Worst Company of the Year (2021) by Yahoo Finance respondents. According to the publication, an “open-ended” survey was published on Yahoo Finance on December 4 and 5, where 1,541 respondents participated. Facebook received 8 percent of the write-in vote, but respondents were seemingly mad about the Robinhood trading app as well. Electric truck startup Nikola, which was named last year’s worst company by the same publication also faced respondents ire.

Yahoo Finance notes, “Facebook has had its share of controversies this year.” Starting in January, Meta-owned WhatsApp got caught up in a huge controversy after the messaging app announced a new privacy policy (Terms of Service). WhatsApp said it would collect user information and share it with third-party apps for a better user experience. However, the app gave users no choice but later made modifications to the policy under pressure. Similarly, the company was under more scrutiny after whistleblower and former Facebook employee Frances Haugen leaked a series of internal documents showing the company’s problematic practices. It was revealed that Meta-owned Instagram had a negative impact on teenage girls, but the company did almost nothing to rectify the problem.

Yahoo Finance even highlights, “At the same time, some critics, including conservatives, say Facebook over-policed the platform’s speech and stifled their voices.” Critics also blame Facebook and other social media platforms for not curbing hate speech that led to Capitol Building riots.

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However, around 30 percent of Yahoo Finance readers said that Facebook or Meta could redeem itself. One respondent suggested that the company could issue a formal apology for negligence and donate a sizable amount of its profits to a foundation to help reverse its harm.

On the other hand, respondents chose Microsoft as the Company of the Year (2021). The Satya Nadella-led company touched the trillion-mark this year and introduced notable upgrades. The most notable is the Windows 11 OS update that succeeds Windows 10.

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FACEBOOK

Facebook pays 1.7 Cr fine to Russia after failing to delete content Moscow deems illegal

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In the latest legal tussle with Russia over controversial social media regulation laws, Facebook paid 17 million roubles (Rs 1.7 Crore) for failing to remove content deemed illegal by Moscow. With a threat of potential larger fines looming, Facebook parent company Meta, owned by Mark Zuckerberg, is scheduled to face court next week over repeated violations of Russian legislation on content, Interfax News Agency reported. As per the latest updates, the social media giant could be fined a percentage of its annual revenue.

In October, Moscow sent state bailiffs to enforce the collection of 17 million roubles. Meanwhile, as per Interfax report citing a federal bailiffs’ database, on Sunday, there were more enforcement proceedings against the company. Apart from the popular social media app, Telegram has also paid 15 million roubles in fines for failing to comply with the Russian social media legislations that came into force in 2016.

Facebook pays $53k to Russia for refusing controversial social media laws

It is pertinent to mention that Facebook has locked horns with Moscow earlier in November, resulting in it paying 4 million roubles ($53,000) over its refusal to adhere to Russian data localisation laws, the Moscow Times reported. The Moscow court on November 25 had said that Facebook paid the fine levied in February, following which all proceedings against the US-based social media giant. The payment comes against the litigation filed against the company in 2018, alongside Twitter. The tech companies were also forced to pay an additional 3000 rubles ($40) for failing to comply with user data sharing rules as per the law. The Russian authorities have also previously blocked LinkedIn, owned by Microsoft, for failing to abide by the laws.

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Russian social media laws

As per Moscow Times, under the Russian social media regulation laws, all foreign technology companies are required to store data related to Russian customers and users on servers located in Russia. Additionally, the Russian tech companies will also have to share encryption data with the federal authorities as well as record user calls, messages and civil society group conversation records. The apparatus is said to be a severe breach of privacy rights and unfettered back-door access to personal data that could be used to harass Kremlin critics.

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Facebook Messenger Is Launching a Split Payments Feature for Users to Quickly Share Expenses

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Facebook Messenger Is Launching a Split Payments Feature for Users to Quickly Share Expenses

Meta has announced the arrival of a new Split Payments feature in Facebook Messenger. This feature, as the name suggests, will let you calculate and split expenses with others right from Facebook Messenger. This feature essentially looks to bring an easier method to share the cost of bills and expenses — for example, splitting a dinner bill with friends. Using this new Split Payment feature, Facebook Messenger users will be able to split bills evenly or modify the contribution for each individual, including their own.

The company took to its blog post to announce the new Split Payment feature in Facebook Messenger. 9to5Mac reports that this new bill splitting feature is still in beta and will be exclusive to US users at first. The rollout will begin early next week. As mentioned, it will help users share the cost of bills, expenses, and payments. This feature is especially useful for those who share an apartment and need to split the monthly rent and other expenses with their mates. It could also come handy at a group dinner with many people.

With Split Payments, users can add the number of people the expense needs to be divided with and, by default, the amount entered will be divided in equal parts. A user can also modify each person’s contribution including their own. To use Split Payments, click the Get Started button in a group chat or the Payments Hub in Messenger. Users can modify the contribution in the Split Payments option and send a notification to all the users who need to make payments. After entering a personalised message and confirming your Facebook Pay details, the request will be sent and viewable in the group chat thread.

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Once someone has made the payment, you can mark their transaction as ‘completed’. The Split Payment feature will automatically take into account your share as well and calculate the amount owed accordingly.


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Tasneem Akolawala is a Senior Reporter for Gadgets 360. Her reporting expertise encompasses smartphones, wearables, apps, social media, and the overall tech industry. She reports out of Mumbai, and also writes about the ups and downs in the Indian telecom sector. Tasneem can be reached on Twitter at @MuteRiot, and leads, tips, and releases can be sent to tasneema@ndtv.com.

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