Will Amazon Ever Pay A Dividend?

Up to date on November 4th, 2022 by Bob Ciura

Over the previous decade, many know-how shares resembling Apple, Inc. (AAPL), Cisco Techniques (CSCO), and extra have initiated dividend funds to shareholders.

Whereas the know-how trade has extensively embraced dividends, not all tech firms pay dividends. One lingering holdout to paying dividends to shareholders is e-commerce big Amazon.com Inc. (AMZN).

Relatively than return money to shareholders, Amazon continues to plow its money stream again into the enterprise.

The choice whether or not or not an organization ought to pay a dividend depends upon many elements. Hundreds of shares pay dividends to shareholders, and an elite few have maintained lengthy histories of elevating their dividends yearly.

For instance, the Dividend Aristocrats are a gaggle of 65 shares within the S&P 500 which have raised their dividends for 25+ years in a row.

You possibly can obtain an Excel spreadsheet of all 65 Dividend Aristocrats (with vital monetary metrics resembling price-to-earnings ratios and dividend yields) by clicking the hyperlink under:

Amazon’s lack of a dividend actually has not harm traders thus far, as Amazon has been a premier progress inventory.

Over the previous 10 years, Amazon inventory generated returns above 20% per 12 months.

However for earnings traders, Amazon is probably not a gorgeous possibility because of the lack of a dividend fee. This text will focus on the possibilities of Amazon ever paying a dividend.

Enterprise Overview

Amazon is an internet retailer that operates a large e-commerce platform the place shoppers should purchase just about something with their computer systems or smartphones.

Amazon is a large-cap inventory with a market cap above $900 billion. It operates by means of the next segments:

North America
Worldwide
Amazon Net Companies

The North America and Worldwide segments embrace the worldwide retail platform of client merchandise by means of the corporate’s web sites.

The Amazon Net Companies section sells subscriptions for cloud computing and storage companies to shoppers, start-ups, enterprises, authorities companies, and tutorial establishments.

Amazon’s e-commerce operations fueled its huge income progress over the previous decade. Gross sales reached $469 billion in 2021, an incredible degree of progress over the previous decade.

Amazon reported spectacular progress in 2021, as demand for e-commerce solely continued to rise.

Supply: Investor Presentation

In fact, Amazon’s large income progress didn’t come straightforward (or cheaply). Amazon needed to spend large quantities of cash to construct its retail operation. Because of this, Amazon had razor-thin revenue margins for a few years of its progress part.

Associated: Which is the higher funding, dividend shares or progress shares?

Within the 2022 third quarter, income of $127.1 billion rose by 15% whereas adjusted EPS of $0.28 beat estimates by $0.07 per share. By section, gross sales in North America elevated 20%, whereas worldwide gross sales elevated 12% excluding international change. AWS gross sales elevated 27% year-over-year.

For the fourth quarter, Amazon expects gross sales between $140 billion and $148 billion, which might develop 2%-8% from the 2021 fourth quarter.

Whereas the retail enterprise nonetheless operates at low gross margins, it continues to generate robust income progress. Individually, the AWS section is very worthwhile, and is essentially the rationale for Amazon’s spectacular earnings progress. Such robust earnings progress improves Amazon’s possibilities of paying a dividend sooner or later sooner or later.

That stated, the corporate nonetheless plans to speculate closely in progress, which makes for uneven earnings-per-share from one quarter to the subsequent.

Progress Prospects

As is typical with many know-how firms, progress funding is Amazon’s prime strategic precedence. That is partly out of necessity. Issues transfer extraordinarily quick in know-how, a extremely aggressive and cyclical trade. Expertise corporations want to speculate giant quantities to remain forward of the pack.

Amazon is not any totally different—it’s making main investments to proceed constructing its on-line retail platform. Amazon continues to develop its retail enterprise. It additionally acquired pure and natural grocer Entire Meals for practically $14 billion. This gave Amazon the brick-and-mortar footprint it desired to additional develop its attain in groceries.

Amazon isn’t stopping there. Along with the retail trade, it goals to unfold its tentacles into different industries as effectively, together with media and healthcare. Amazon has constructed a large media platform through which it distributes content material to its Amazon Prime members.

Making authentic content material is one other extremely capital-intensive endeavor, which would require large sums to ensure that Amazon to compete with the likes of streaming giants Netflix (NFLX) and Hulu, in addition to different tv and film studios.

Now that Amazon dominates retail and media content material, it’s readying a possible transfer into the healthcare trade. In 2018, Amazon acquired on-line pharmacy PillPack for $753 million.

Extra not too long ago, in 2022 Amazon introduced the acquisition of One Medical in a $3.9 billion all-cash transaction, together with One Medical’s debt. One Medical is a nationwide main care firm.

On the identical time, Amazon continues to construct its presence in robotics, notably in family merchandise. Amazon not too long ago introduced the $1.7 billion all-cash acquisition of iRobot (IRBT), which makes the Roomba and different merchandise.

These investments will gas Amazon’s income progress, which is what the corporate’s traders are primarily involved with. However, such aggressive spending will restrict Amazon’s potential to pay dividends to shareholders, no less than for a while.

An added problem to Amazon’s earnings-per-share progress is the latest rise in prices throughout its enterprise. Within the 2022 fourth quarter, working earnings is anticipated to be between $0 and $4 billion, in contrast with $3.5 billion within the fourth quarter of 2021.

Will Amazon Ever Pay A Dividend?

Amazon has joined the ranks of worthwhile tech firms like Apple and Cisco, which generate excessive earnings-per-share. On this manner, Amazon has climbed forward of different related tech shares like Netflix (NFLX), which nonetheless doesn’t pay a dividend (and may by no means) because of an absence of constant income.

Amazon’s earnings-per-share have been $3.24 (split-adjusted) in 2021, which implies the corporate has reached a brand new degree of profitability. Nevertheless, Amazon nonetheless has a technique to go earlier than anybody ought to realistically anticipate it to start paying dividends.

In principle, Amazon may pay a dividend if it selected to, as the corporate is very worthwhile.

The corporate can use its income for a variety of functions, together with debt compensation, reinvestment in future progress initiatives, paying dividends, or share buybacks.

If Amazon selected to, it may distribute a dividend to shareholders, though any introduced dividend payout would seemingly be small, when it comes to the dividend yield.

For instance, even when Amazon maintained a dividend payout ratio of fifty% (which is very unlikely for a growth-oriented tech firm), the dividend of $1.62 per share would symbolize a 1.8% yield.

And, Amazon’s earnings and free money stream are below important strain from rising prices, making it not possible Amazon will declare a dividend within the close to time period.

Last Ideas

There is no such thing as a debating the truth that Amazon has been one of the crucial spectacular progress firms in historical past. From its humble beginnings as an internet ebook vendor, Amazon now dominates the net retail trade. It is usually a large cloud companies supplier, in addition to a film studio and content material streaming big.

In the end, an organization has to make the choice to provoke a dividend fee. That is usually achieved when future progress not requires such heavy funding. For Amazon, the corporate nonetheless has many new avenues for future growth in thoughts, together with (however not restricted to) media content material, grocery shops, and well being care.

Progress remains to be very a lot the highest precedence for Amazon. Because of this, traders mustn’t anticipate a dividend fee any time quickly.

See the articles under for evaluation on different shares that at present don’t pay dividends and whether or not they may.

Will JD.com Ever Pay A Dividend?
Will Shopify Ever Pay A Dividend?
Will PayPal Ever Pay A Dividend?
Will Pinduoduo Ever Pay A Dividend?
Will Adobe Ever Pay A Dividend?

At Positive Dividend, we regularly advocate for investing in firms with a excessive likelihood of accelerating their dividends each 12 months.

If that technique appeals to you, it could be helpful to flick thru the next databases of dividend progress shares: