Mark Zuckerberg Set to Earn $700 Million in Annual Dividends from Meta Platforms

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# Mark Zuckerberg Set to Earn $700 Million in Annual Dividends from Meta Platforms

Mark Zuckerberg, the founder and CEO of Meta Platforms, is expected to receive a staggering $700 million in annual dividends from the company’s new payout, positioning him as one of California’s highest earners and largest taxpayers.

In a surprising move that caught Wall Street off guard, Meta Platforms announced a quarterly dividend of 50 cents per share, totaling $2 annually. Zuckerberg, who owns 350 million shares and holds a 13% economic stake with 61% voting control, stands to benefit greatly from this distribution. It is important to note that the majority of Zuckerberg’s shares are supervoting B shares, as stated in Meta’s 2023 proxy statement.

With this new dividend program in effect, Zuckerberg’s annual dividend earnings will amount to approximately $700 million. It is worth mentioning that in recent years, he has been receiving a mere $1 salary with no bonus. However, his 2022 compensation of $27 million primarily consisted of costs associated with personal security.

According to Robert Willens, a tax expert from New York, Zuckerberg will face a federal tax rate of 23.8%, which includes a 20% federal tax on dividend income and an additional 3.8% Medicare surcharge. In addition, he will be subjected to California’s top state income-tax rate of 13.3%.

Unlike the federal government, most states do not offer preferential tax rates on dividend income relative to earned income. As a result, “he’s looking at a 37 percent ‘all-in’ tax levy on these dividends,” explains Willens in an email interview.

In light of Meta’s success with dividend payouts, there is speculation that other tech giants such as Alphabet, Amazon.com, and Tesla might follow suit and initiate similar programs in the future. Alphabet, for instance, has previously shown a preference for returning cash to shareholders through stock repurchases, but its substantial earnings and free cash flow make it a strong contender for future dividend payments.

Zuckerberg’s stake in Meta Platforms has now reached a staggering worth of approximately $168 billion. With shares jumping 20.3% to a record high of $474.99 following an impressive fourth-quarter earnings report and positive financial outlook, Zuckerberg is currently ranked fourth among Bloomberg’s list of the world’s wealthiest individuals, trailing behind Elon Musk, Bernard Arnault of LVMH, and Jeff Bezos.

It is clear that Meta Platforms’ dividend announcement has made a significant impact on Zuckerberg’s financial standing, solidifying his status as one of California’s highest earners and reinforcing the company’s position in the tech industry.

# The Importance of Dividends for Tech Giants

Tech giants like Meta and Alphabet have the financial capacity to both buy back stock and pay dividends. In fact, Meta recently repurchased $20 billion of its own stock in 2023, while also planning to spend approximately $5 billion annually on dividends.

It is common for tech companies to not offer dividends, often citing a preference for allocating resources towards areas of growth. However, from an investor’s perspective, dividends are becoming increasingly crucial as a signal of management’s confidence in the company’s future success.

Interestingly, one reason why founder-led companies may shy away from paying dividends is the potential tax implications for founders with significant equity stakes. These stakeholders would face substantial tax bills due to the distribution of dividends.

Prominent companies such as Alphabet, Tesla, Amazon.com, and Berkshire Hathaway are examples of powerful firms led by their founders, yet they do not distribute dividends.

Warren Buffett’s Berkshire Hathaway, in particular, adopts this policy to minimize Buffett’s annual tax liability. Back in 2015, when Buffett faced criticism from then-presidential candidate Donald Trump, he revealed that he earned $11.5 million in income from dividend stocks he personally held. As a result, he paid $1.8 million in federal income taxes.

Buffett’s stake in Berkshire Hathaway has now surged to over $125 billion, with the company’s stock reaching record highs. The Class A shares currently trade at $584,385 and have increased by 0.5%. Given Buffett’s intentions to donate his Berkshire holdings after his passing, it is likely that he will have paid comparably low taxes throughout his lifetime, despite accumulating immense wealth.

If Berkshire Hathaway were to introduce a 1% dividend policy, Buffett would receive more than $1 billion in annual income and would be subject to a 30% federal and state tax rate on that income.

In conclusion, while some tech giants opt to prioritize other areas for spending over dividends, dividends remain significant both as a signal of confidence and as a potential taxable income for stakeholders.

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