It’s not surprising that many would like to know whether or not Amazon pays dividends on its shares. After all, who wouldn’t want to invest in a company with the potential for high returns?
But does Amazon stock actually pay dividends?
The short answer is no. However, this doesn’t mean you should avoid investing your hard-earned money in this ecommerce giant. Chances are it’ll be worth your while!
Read on below to find out more about how stocks work and what you can expect from the company that’s dominated the global world of ecommerce.
Companies that pay dividends are said to be different from those that do not. This is because companies that do not pay dividends will generally reinvest their earnings back into the business in order to grow their operations.
If a company can afford it, it may pay a dividend – but this is generally reserved for larger corporations with reliable cash flow and low debt. Smaller companies generally do not have enough valuable assets to justify paying out additional money in the form of dividends to shareholders.
Despite raking in over $300 billion in revenue in 2020, the ecommerce giant has yet to pay dividends to its stockholders.
What Amazon lacks in dividend payouts, it repays in growth opportunities. Over the past few years, Amazon stock has soared. When companies opt out of paying dividends, they have plenty of options when it comes to investing their net earnings.
One thing that Amazon has decided to do is invest in growth opportunities aggressively. Over the past three years, Amazon has re-invested $59 billion in real estate, facilities, and machinery.
The ecommerce giant has funded so many growth opportunities that the company has even used up some of its savings in capital investments. What’s more interesting to hear is that the company is able to self-fund these expansion efforts. Over the past decade, Amazon was able to grow its annual EPS from $2.53 to $41.83.
With a net debt rate of only $3.15 billion and an annual gross revenue of $386 billion in the past year, it’s easy to see how profitable the ecommerce platform is for stockholders.
For now, it’s safe to assume that Amazon will continue to invest in opportunities to grow its shares. Even without dividends, stockholders will likely get more than decent results.
As for traders who are interested in playing the long game, there’s definitely a high possibility that Amazon will choose to pay out dividends in the future. Eventually, Amazon will earn more in revenue than there are ways to re-invest in growth.
While nothing is set in stone, this is definitely a possibility. At the rate it’s growing, Amazon will eventually rake in more cash than the company knows what to do with. When this happens, there is a huge possibility that the company will start sharing its revenue with stockholders.
Additionally, stockholders who are willing to hold out may have better earning opportunities when Amazon finally decides to pay dividends. Since the company continues to invest in opportunities for growth, stockholders may expect more sustainable dividends in the future.
Amazon’s dedication to growth and its dedicated management staff are some of its key selling points for investors. Its founder Jeff Bezos has long since expressed his intentions to focus on the company’s long-term development – even as far back as twenty years ago.
While the company heavily relies on its consumer’s economic activities, Bezos has done a great job of diversifying its revenue sources. For now, it may seem like the company is only known for its online shopping platform, that’s simply not the case.
Upon closer inspection, the ecommerce giant has made moves to dominate the cloud computing and advertisement field. Just this year, Amazon’s advertising business has amassed nearly $7 billion per quarter – which is impressive to say the least.
Long story short, investing in Amazon is a good idea for you if you want a long-term investment. However, if you want to make bank in a year or two, then it may not be an attractive option for you.
For now, Amazon doesn’t pay dividends. That said, if you want to be patient and reap the rewards of Amazon’s growth strategies, then it’s likely to bring in a prosperous return in the future.
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