Congratulations to all my fellow Meta Platforms shareholders. As you hopefully know by now, the social media giant recently declared its first-ever dividend. While this isn't the most generous payout on the market -- its yield is 0.4%, well under the current 1.4% of the S&P 500 index component stocks -- it theoretically adds to the attraction of what has already been quite a popular investment.
I say "theoretically," because of course it's too soon to gauge its effect. Let's take a look at two other companies that initiated dividend payments at least a few months back to see how they've fared since then. Perhaps Meta will follow a similar path to T-Mobile US(NASDAQ: TMUS) and/or Endeavor Group Holdings(NYSE: EDR).
1. T-Mobile US
T-Mobile US, a scrappy company that's the No. 3 mobile services provider in the U.S. behind Verizon and AT&T, was relatively late to the incumbent telecom dividend party.
Long after both of its larger peers had established lengthy histories of shareholder disbursements, T-Mobile finally took the plunge last September. It declared a quarterly payout of $0.65 per share, which it pledged to grow by 10% annually. These days the company's dividend yields 1.6%, a slightly higher figure than that S&P 500 index average, although well below the 6%-plus yields of both Verizon and AT&T.
T-Mobile US might be exiting the payout parade early. The company committed only to keeping the dividend alive through the end of this year, so its fate is unclear.
Nevertheless, its stock has risen by a bit over 20%, which almost exactly matches the advances of both Verizon and AT&T. Despite being in the same business, the trio generally doesn't trade in concert, so this matching of their share price trajectories is curious. By the way, that figure was nearly double the percentage-rate increase of the S&P 500 index across the same stretch of time.
Typically, a dividend initiation occurs when a company's management is confident enough in its fundamentals to commit to a big cash outlay on the regular (investors tend to expect a dividend policy to be at least maintained for some time after inauguration).
Sure enough, T-Mobile has been doing well in recent months. Free cash flow (FCF), the source from which every dividend springs, has seen a pronounced upward lift over the past few quarters thanks to notable gains in the key wireless segment, and in the smaller home internet market.
Meanwhile, the company managed to throw off the burden that was its share issuance agreement with Softbank. On top of that, the broader wireless industry continues to benefit from investor bullishness on the effect of 5G services.
2. Endeavor Group Holdings
As the successor company to an old-school talent agency, Endeavor morphed into an omnibus entertainment conglomerate with assets in the film, TV, and sports worlds. It's a relative newcomer to the stock exchange, having become a publicly traded company after its 2021 IPO.
There wasn't much of a lag between that event and its first quarterly dividend declaration, which occurred at the end of August 2023. This initial payout was set at $0.06 per share and has been paid two quarters so far. At the current share price, that makes its yield a shade under 1%.
Since then, Endeavor stock lagged the S&P 500 index slightly, rising by nearly 10% since the dividend declaration to the indicator's 11% and change. The trajectories of the two hardly match at all, though, and that's largely because of one event.
At the end of last October, Endeavor's sagging share price saw a very healthy boost when the company announced it had taken that ever-popular decision to "evaluate strategic alternatives," for its future. Sure enough, private equity firm Silver Lake (a major shareholder of the company) revealed on the same day that it was working on taking Endeavor private again.
The market loves a buyout, and this one could be lucrative. That's because Endeavor seems undervalued to many given its assets, the crown jewel of which is its controlling stake in World Wrestling Entertainment (WWE) and Ultimate Fighting Championship owner TKO Group Holdings.
Since then, there has been little substantial news on the Silver Lake front. Investors are still clinging to the hope of an attractively priced go-private deal, as other aspects of Endeavor's business haven't been too hot. Third-quarter earnings featured a surprise net loss, for example, and TKO Group Holdings is currently at the center of an ugly scandal involving former WWE CEO Vince McMahon.
So it feels like Endeavor's dividend is almost a side note, with those other developments grabbing most of the market's attention. I doubt very few of the company's investors are thinking about that payout just now.
Should you invest $1,000 in T-Mobile US right now?
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Randi Zuckerberg, a former director of market development and spokeswoman for Facebook and sister to Meta Platforms CEO Mark Zuckerberg, is a member of The Motley Fool's board of directors. Eric Volkman has positions in Meta Platforms and TKO Group Holdings. The Motley Fool has positions in and recommends Meta Platforms. The Motley Fool recommends T-Mobile US, TKO Group Holdings, and Verizon Communications. The Motley Fool has a disclosure policy.
