On February 1, 2024, another Thursday, META announced that it would pay its first-ever dividends. Investors did not expect the news as Facebook then and Meta today returned cash to shareholders only through share buybacks.

Shareholders of record on February 22 were paid a $0.50 per share dividend (0.4%) on March 26, and the ensuing payouts will be quarterly. The company also authorized a US$50 billion share buyback.

Tax considerations

Is Meta worth buying because it’s a dividend-payer now? According to its CFO, Susan Li, returning capital to shareholders remains an important priority. But she adds that introducing a dividend is a nice complement to the existing share repurchase program. It also provides a more balanced capital return program and some added flexibility in the future.

While META is a blue-chip stock and belongs to the US$1 trillion club (market cap), the nearly US$520 share price is steep for regular investors. Moreover, the dividend yield is very modest. For Canadians wishing to take positions in META, the dividends are subject to a 15% withholding tax and are non-recoverable, even in a Tax-Free Savings Account (TFSA).

Fortunately, because of a tax treaty between Canada and the U.S., dividends from American companies are tax-exempt but only if the stocks are in a Registered Retirement Savings Plan (RRSP).

Better buy

Meta is a growth stock, but its gains in the last three years (+65%) have not been spectacular. The three-year performance of Canadian stocks in the 2023 TSX30 List, the flagship program for growth stocks, are between 304% (rank 30) and 1,913% (rank 1).

The Canadian Imperial Bank of Commerce (TSX:CM) is a hands-down choice or better buy than Meta for income-oriented investors. At C$67.16 per share (+6.7% year to date), the dividend yield is 5.36%. Besides those dividends are sustainable (53.36% payout ratio); the C$6.2 billion bank has been paying dividends since 1868.

Its 156-year dividend track record lends confidence and is a compelling reason to invest in CIBC. In Q1 fiscal 2024 (three months ending January 31, 2024), net income climbed 299% to C$1.7 billion versus Q1 fiscal 2023 despite a fluid economic environment.

Its President and CEO, Victor Dodig, said CIBC is building on the growth momentum it has established over the last few years and has delivered a strong start to fiscal 2024. CIBC CFO Haradh Panossian adds, “We remain focused on scaling our U.S. business and are positioned to drive long-term profitable growth across both Commercial Banking and Wealth Management.”

Dividend universe

Meta is undoubtedly a growth stock for the long term. The unveiling of its next-generation custom-made chips for AI workloads should boost the stock further. However, if your objective is to create passive income, CIBC is the logical choice. Moreover, unlike Meta, Canada’s fifth-largest bank is not new to the dividend universe.  

The post Meta Is Now a Dividend Stock, but This TSX Stock Is a Better Buy appeared first on The Motley Fool Canada.

More reading

• 2 Canadian Stocks Worth Buying Today and Holding for 5 Years
• 2 High-Quality Canadian Stocks I’d Buy in This Uncertain Market
• Top Stocks to Double Up on Right Now
• CIBC Just Hit a Revenue Record — Here’s Why the Stock Still Looks Undervalued
• The Canadian Stock I’d Want in My Corner When Volatility Strikes