Will Amazon Ever Pay A Dividend?

Up to date on July thirteenth, 2023 by Bob Ciura

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

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

Moderately than return money to shareholders, Amazon continues to plow its money move again into the enterprise.

The choice whether or not or not an organization ought to pay a dividend relies on 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 67 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 67 Dividend Aristocrats (with vital monetary metrics reminiscent of price-to-earnings ratios and dividend yields) by clicking the hyperlink under:

Amazon’s lack of a dividend actually has not damage traders up to now, as Amazon has been a premier tech inventory.

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

However for revenue traders, Amazon will not be a gorgeous choice 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 a web based retailer that operates a large e-commerce platform the place customers can purchase just about something with their computer systems or smartphones.

Amazon is a mega-cap inventory with a market cap above $1 trillion. It operates by means of the next segments:

North America
Worldwide
Amazon Internet Companies

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

The Amazon Internet Companies phase sells subscriptions for cloud computing and storage companies to customers, start-ups, enterprises, authorities businesses, and educational establishments.

Amazon’s e-commerce operations fueled its huge income progress over the previous decade. Gross sales reached $514 billion in 2022, an incredible degree of progress over the previous decade. Amazon reported spectacular progress in 2022, as demand for e-commerce continued to rise.

The corporate noticed continued progress within the first quarter of 2023.

Supply: Investor Presentation

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

Within the first quarter of 2023, income of $127.36 billion beat analyst estimates by $2.76 billion, whereas adjusted EPS of $0.31 beat by $0.09. Web gross sales elevated 9% year-over-year. Excluding foreign money fluctuations, gross sales elevated 11% for the quarter.

By phase, North America phase gross sales elevated 11% year-over-year, whereas AWS gross sales rose 16% and Worldwide phase gross sales rose 1%.

Working revenue elevated 30% year-over-year, to $4.8 billion. Adjusted earnings-per-share of $0.31 in comparison with a lack of $0.38 within the 2022 first quarter.

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

That mentioned, the corporate nonetheless plans to take a position closely in progress, which makes for uneven earnings-per-share from one quarter to the following.

Development Prospects

As is typical with many know-how corporations, 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 business. Know-how companies want to take a position giant quantities to remain forward of the pack.

Amazon isn’t any completely 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 Complete Meals for almost $14 billion. This gave Amazon the brick-and-mortar footprint it desired to additional increase its attain in groceries.

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

Making authentic content material is one other extremely capital-intensive endeavor, which would require big 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 business. In 2018, Amazon acquired on-line pharmacy PillPack for $753 million.

Extra just lately, 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 similar time, Amazon continues to construct its presence in robotics, notably in family merchandise. Amazon just lately 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. Nonetheless, such aggressive spending will restrict Amazon’s skill to pay dividends to shareholders, at the least for a while.

For the 2023 second quarter, working revenue is anticipated to be between $0 and $4 billion, in contrast with $3.7 billion within the second quarter of 2022.

Will Amazon Ever Pay A Dividend?

Amazon has joined the ranks of worthwhile tech corporations like Apple, Microsoft, and Cisco, all of which generate excessive earnings-per-share. Apple, Microsoft, and Cisco are actually blue-chip tech dividend payers.

In principle, Amazon might pay a dividend, as the corporate must be worthwhile in fiscal 2023. Amazon’s earnings-per-share are forecast to be $1.56 for fiscal 2023.

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 might distribute a dividend to shareholders, though any introduced dividend payout would doubtless be small, by way of the dividend yield.

For instance, even when Amazon maintained a dividend payout ratio of 25%, which might be acceptable for a growth-oriented tech firm, the dividend of $0.39 per share would characterize only a ~0.3% yield.

Moreover, Amazon’s earnings and free money move are underneath strain from rising prices, making it not possible Amazon will declare a dividend within the near-term.

Ultimate Ideas

Amazon has been probably the most spectacular progress corporations in historical past. It now dominates the net retail business. It is usually a large cloud companies supplier, in addition to a film studio and content material streaming large.

In the end, an organization has to make the choice to provoke a dividend fee. That is usually finished when future progress not requires such heavy funding.

For Amazon, the corporate nonetheless has many new avenues for future enlargement in thoughts, together with (however not restricted to) media content material, grocery shops, and well being care.

Development continues to be very a lot the highest precedence for Amazon. In consequence, traders shouldn’t count on a dividend fee any time quickly.

See the articles under for evaluation on different shares that presently 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 corporations with a excessive likelihood of accelerating their dividends every 12 months.

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