Will Amazon Ever Pay A Dividend?

Up to date on January twenty fourth, 2025 by Bob Ciura

Over the previous decade, many expertise shares similar to Apple, Inc. (AAPL), Cisco Programs (CSCO), and extra have initiated dividend funds to shareholders.

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

Somewhat than return money to shareholders, Amazon continues to plow its money movement again into the enterprise.

The choice whether or not or not an organization ought to pay a dividend is dependent upon many elements. 1000’s 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 bunch of 66 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 66 Dividend Aristocrats (with vital monetary metrics similar to price-to-earnings ratios and dividend yields) by clicking the hyperlink under:

Amazon’s lack of a dividend actually has not damage buyers so far, as Amazon has been a premier tech inventory.

Over the previous 10 years, Amazon inventory generated returns above 30% per 12 months. However for revenue buyers, Amazon will not be a pretty choice because of the lack of a dividend cost.

This text will talk about the probabilities of Amazon ever paying a dividend.

Enterprise Overview

Amazon is an internet retailer that operates an enormous e-commerce platform the place customers can purchase nearly something with their computer systems or smartphones.

Amazon is a mega-cap inventory with a market cap of roughly $2.4 trillion. It operates by the next segments:

North America
Worldwide
Amazon Net Providers

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

The Amazon Net Providers phase sells subscriptions for cloud computing and storage providers to customers, start-ups, enterprises, authorities companies, and tutorial establishments.

Amazon’s e-commerce operations fueled its huge income development over the previous decade. The corporate noticed continued development in the newest quarter.

Supply: Investor Presentation

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

Within the third quarter of 2024, income of $148 billion elevated 10% year-over-year. Excluding forex fluctuations, gross sales elevated 10%.

By phase, North America phase gross sales elevated 9% year-over-year, whereas AWS gross sales rose 19% and Worldwide phase gross sales rose 7% excluding forex.

Working revenue elevated to $14.7 billion. Internet revenue elevated to $1.26 per diluted share, in contrast with $0.65 per diluted share within the year-ago quarter.

Whereas the retail enterprise nonetheless operates at low gross margins, it continues to generate robust income development. Individually, the AWS phase is extremely worthwhile, and is basically the explanation for Amazon’s spectacular earnings development. Such robust earnings development improves Amazon’s probabilities of paying a dividend sooner or later sooner or later.

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

Development Prospects

As is typical with many expertise corporations, development funding is Amazon’s prime strategic precedence. That is partly out of necessity.

Issues transfer extraordinarily quick in expertise, which is a extremely aggressive trade. Expertise corporations want to take a position massive 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 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 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 trade. 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 major care firm.

These investments will gasoline Amazon’s income development, which is what the corporate’s buyers are primarily involved with. However, such aggressive spending will restrict Amazon’s potential to pay dividends to shareholders, not less than for a while.

Working revenue is anticipated to be between $11.5 billion and $15.0 billion, in contrast with $11.2 billion in third quarter 2023.

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 ought to be worthwhile in fiscal 2023. Amazon’s earnings-per-share are forecast to be $4.84 for fiscal 2024.

The corporate can use its earnings for numerous functions, together with debt compensation, reinvestment in future development initiatives, paying dividends, or share buybacks.

If Amazon selected to, it might distribute a dividend to shareholders, though any introduced dividend payout would possible be small, by way of the dividend yield.

For instance, even when Amazon maintained a dividend payout ratio of 25%, which might be applicable for a growth-oriented tech firm, the dividend of $1.21 per share would signify only a ~0.6% yield.

Ultimate Ideas

Amazon has been one of the vital spectacular development corporations in historical past. It now dominates the web retail trade. Additionally it is an enormous cloud providers supplier, in addition to a film studio and content material streaming big.

Finally, an organization has to make the choice to provoke a dividend cost. That is typically finished when future development now 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. Consequently, buyers mustn’t count on a dividend cost any time quickly.

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 could be helpful to flick through the next databases of dividend development shares: