For over 25 years I have followed the stock market and love dividend investing. Although I missed out on investing in Amazon (NASDAQ: AMZN) early, it is one of my favorite stocks. Like many investors, I love dividend stocks and wondered if Amazon pays a dividend.
Amazon.com, Inc. engages in the retail sale of consumer products and subscriptions in North America and internationally. The company operates through three segments: North America, International, and Amazon Web Services (AWS).
The company was founded in 1994 and is based out of Seattle, Washington, and sells merchandise and content purchased for resale from third-party sellers through physical and online stores. The company also manufactures and sells electronic devices, including Kindle, Fire tablets, Fire TVs, Rings, and Echo and other devices; provides Kindle Direct Publishing (KDP) services; develops digital advertising services; provides cloud computing services through Amazon Web Services (AWS) to large enterprises and independent software vendors (ISVs), and sells certain other service related to the company’s website. The company was founded in 1994 and is headquartered in Seattle, WA.
Amazon has had another record year and investors are wondering if Amazon will change its position on dividends?
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Does Amazon Pay Dividends?
The short answer is that Amazon does not pay dividends because the focus of the company is growth and expansion. A dividend payment would take away the funds needed to expand.
Amazon stock has had a record year and is currently trading about $3000 a share. The main reason behind Amazon’s non-payment of dividends is the lack of consistent profits and leadership’s focus on growth. In addition, Amazon is still in the growth phase of business, so they will likely focus on growing Amazon’s business rather than paying a dividend.
Will Amazon Ever Pay A Dividend?
As a general rule, companies like Amazon do not pay dividends and will not pay dividends in the future. The only chance it would start paying dividends is Amazon did not see any more opportunities for growth and completely new leadership. Jeff Bezos is leaving, but I don’t think the leadership will change its position on growth vs. dividends.
However, Amazon is in the league with other major tech giants that are reporting billions in revenue every year. Others include Cisco and Apple. Amazon has grown to overtake other tech stocks like Netflix, yet it does not pay dividends to its shareholders.
Amazon has the potential to pay dividends if it chose to. This is because the company has maintained a positive flow of income that could be used to pay dividends. With the huge cash in-flow, the company has enough money to reinvest in future growth programs, repay its debts, pay dividends, and build its balance sheet.
Over the past decade, several technology companies have initiated dividend payment programs for their shareholders. The technology sector is a great source of dividends, with more than 300b technology companies paying dividends to shareholders. Amazon has made its position in terms of capitalization, although it does not pay dividends to its shareholders.
Instead of paying dividends, Amazon has been reinvesting its profits back into the business. According to analysts, the stock might perform better if the company adopts the trend of paying dividends.
Another popular question: Will Amazon Stock Split? No – Click to read more.
Should Amazon Pay Dividends?
Tech startups take time before starting to pay dividends. Due to immense competition, capital-intensive companies are keen to build up more capital. According to many startups, returning the much-needed capital to shareholders may overexpose the company’s competition and fail to catch up with its rivals. Amazon has capitalized on the strategy of investing back its profit.
The strategy has allowed Amazon to take full advantage of the strong periods while at the same time surviving the downturns that proved fatal for many of its competitors. Amazon’s decision not to pay dividends has not hurt its point as it has seen continued growth in its stock. The company has generated around 39% in revenue every year for the last ten years. The e-commerce giant has seen its revenue grow to around $26.7 billion over the past 12 months.
Amazon’s Business Network
Amazon operates in North America, the international market, through its Amazon Web Services. The company uses its website to serve the North American and International market segments. On the other hand, the company uses its Amazon Web Services segment to sell cloud and storage services to startups, consumers, governments, enterprises, and academic institutions.
Amazon has seen significant growth in its revenue over the last decade thanks to growth in its e-commerce revenue. The company reported $280 billion in revenue in 2019 compared to $14.84 billion in 2008.
To achieve these growth margins, Amazon spends huge investments in building its retail operations. Due to these large investments, Amazon always collected very little profits for several years.
In 2020 as the COVID-19 pandemic raged on, Amazon posted impressive growth. In its Q1 2020 results, the company reported $75.5 billion in revenue and exceeded previous projections of between $69 billion to $73 billion. This represents a 26.4% growth rate compared to what the company reported last year.
The impressive results were boosted by 22% increase in product sales plus 32.2% increase in service sales, which accounted for 44.5% of the company’s sales during the year. Amazon reported $3.399 billion in operating revenue, a drop from $4.2 reported in 2019. Finally, the e-commerce company reported $2.54 billion in net revenue, a drop from the $3.56 billion reported a year ago.