{"id":314794,"date":"2019-03-01T14:07:47","date_gmt":"2019-03-01T19:07:47","guid":{"rendered":"https:\/\/financhill.com\/blog\/?p=314794"},"modified":"2019-03-01T14:09:50","modified_gmt":"2019-03-01T19:09:50","slug":"amazon-stock-dividend","status":"publish","type":"post","link":"https:\/\/financhill.com\/blog\/investing\/amazon-stock-dividend","title":{"rendered":"Is an Amazon Dividend on the Horizon?"},"content":{"rendered":"<p>Dividend stocks play an important role in many investor portfolios. These cash payments are made on a regular basis to shareholders and provide a way for investors to share in a company\u2019s profits.<\/p>\n<p>Some people use them for income, while others reinvest them, buying more stock and reaping more dividends. It adds up. According to\u00a0<a href=\"https:\/\/money.usnews.com\/investing\/investing-101\/articles\/what-are-dividends-and-how-do-they-work\" target=\"_blank\" rel=\"noopener\">Santa Barbara Asset Management<\/a>, some 42% of the returns the S&amp;P 500 has generated since 1930 come from dividends.<\/p>\n<p>Companies pay dividends to make their stock more attractive to investors after growth slows. They cover their operating expenses and reinvestment a little in the business, then they spread the love to their shareholders. These companies are normally more established or mature.<\/p>\n<p>Does that sound like <strong>Amazon [<a href=\"https:\/\/financhill.com\/search\/charts\/AMZN\">NASDAQ: AMZN<\/a>]<\/strong> to you?<\/p>\n<h2>Amazon Stock Price History<\/h2>\n<p>Amazon\u2019s share price has swelled\u00a0<a href=\"https:\/\/www.forbes.com\/sites\/brettowens\/2018\/09\/21\/how-to-grab-massive-cash-dividends-from-amazons-landlords\/#2061e0887103\" target=\"_blank\" rel=\"noopener\">101,000%<\/a>\u00a0since its IPO so many years ago.<\/p>\n<div class=\"financhill-widget\" data-symbol=\"amzn\" data-width=\"600\" data-type=\"stock-score\" data-custom=\"null\"><\/div>\n<p><script src=\"https:\/\/financhill.com\/js-min\/widget.js\"><\/script><\/p>\n<p>According to\u00a0<a href=\"https:\/\/www.cnbc.com\/2018\/09\/05\/if-you-invested-1000-in-amazon-in-1997-heres-what-youd-have-now.html\" target=\"_blank\" rel=\"noopener\">CNBC<\/a>, \u201cIf you had invested $1,000 during Amazon&#8217;s IPO in May 1997, your investment would be worth $1,362,000 as of September 4,\u201d 2018 \u2013 and the company has grown even more since then.<\/p>\n<p>As of March 1, 2019, Amazon\u2019s share price had a 52-week range of $1307.00 to $2050.50. Analysts put the one-year target estimate at $2075.74 for the company.<\/p>\n<h2>Should Amazon Pay a Dividend?<\/h2>\n<p><strong>Amazon [<a href=\"https:\/\/financhill.com\/search\/fundamentals\/AMZN\">NASDAQ: AMZN<\/a>]<\/strong> COULD\u00a0<a href=\"https:\/\/www.smarteranalyst.com\/analyst-insights\/technology-stocks\/will-amazon-amzn-ever-pay-dividend\/\" target=\"_blank\" rel=\"noopener\">pay a dividend<\/a>.<\/p>\n<p>Unlike many other tech stocks, its profits are fairly consistent, and it has enough free cash flow to cover the cost. However, early-stage companies don&#8217;t pay usually dividends. Nor do high-growth companies. Amazon is a little of both.<\/p>\n<p>Amazon is still young in some of its industries and it is definitely growing.<\/p>\n<p>The online retail giant needs its income to invest in growth and remain competitive against the pantheon of companies it competes against.<\/p>\n<p><a href=\"https:\/\/budgeting.thenest.com\/happens-company-doesnt-pay-dividends-stockholders-24276.html\" target=\"_blank\" rel=\"noopener\">Reinvested profits<\/a>\u00a0can help fund research on new ventures, purchase assets, and open new locations, like its recently announced\u00a0<a href=\"https:\/\/finance.yahoo.com\/news\/amazon-plans-grocery-store-business-175411638.html\" target=\"_blank\" rel=\"noopener\">grocery stores<\/a>.<\/p>\n<p>Also, retaining earnings could help <strong>Amazon [<a href=\"https:\/\/financhill.com\/search\/seasonality\/AMZN\">NASDAQ: AMZN<\/a>]<\/strong> access credit more readily.<\/p>\n<h2>How Does Amazon Invest Its Money?<\/h2>\n<p>To understand how Amazon invests its money, let\u2019s start by looking at how the retail giant\u00a0makes its money.<\/p>\n<p>Around 67% of Amazon\u2019s income comes from the retail products it sells, while 17% of the company\u2019s net sales by revenue is from third-parties selling through its site.<\/p>\n<p>Another 9% comes from\u00a0<a href=\"https:\/\/aws.amazon.com\/solutions\/case-studies\/\" target=\"_blank\" rel=\"noopener\">Amazon Web Services<\/a>\u00a0(AWS), which <strong>Capital One [<a href=\"https:\/\/financhill.com\/search\/charts\/COF\">NYSE: COF<\/a>]<\/strong>, Adobe, Dow Jones, Vodafone, Conde Nast, Comcast, and Kellogg counts amongst its clients, and 5% comes from Prime and other memberships.<\/p>\n<div class=\"financhill-widget\" data-symbol=\"cof\" data-width=\"600\" data-type=\"stock-score\" data-custom=\"null\"><\/div>\n<p><script src=\"https:\/\/financhill.com\/js-min\/widget.js\"><\/script><\/p>\n<p>That sounds impressive, but the truth is that\u00a0<strong>Amazon [<a href=\"https:\/\/financhill.com\/search\/seasonality\/AMZN\">NASDAQ: AMZN<\/a>]<\/strong> isn\u2019t making much money from its retail business. The Street reports that this segment is actually <strong>losing money<\/strong>.<\/p>\n<p>In 1Q18, \u201cAmazon reported $1.9 billion in net income on $51 billion in revenue for the quarter, and that is only a 3.7% profit margin, but it gets worse when you separate out AWS (Amazon Web Services) and Prime from the retail side of the business,\u201d writes\u00a0<a href=\"https:\/\/www.thestreet.com\/opinion\/amazon-is-losing-money-from-retail-operations-14571703\" target=\"_blank\" rel=\"noopener\">The Street<\/a>.<\/p>\n<p>\u201cHowever, if we back out the AWS numbers from the overall results, we are left with $45.6 billion in revenue and $500 million in earnings.<\/p>\n<p>Margins outside of AWS then shrink to 1%, but retail is actually worse than that.\u201d The Street estimates that Amazon lost around $2 billion that quarter, if you don\u2019t count Prime and AWS.<\/p>\n<p>Basically, Amazon\u2019s retail business is a loss leader to attract people to its site and entice them to membership. To that end, Amazon has been\u00a0upping its ante\u00a0with its Whole Foods acquisition as well as its purchase of online pharmacy company <strong>PillPack<\/strong>. The company is also creating media content to further attract subscribers.<\/p>\n<h2>Is an Amazon Dividend Payment Likely?<\/h2>\n<p>No. It\u2019s not.<\/p>\n<p>Amazon\u2019s stock price has never been less than\u00a0<a href=\"https:\/\/www.forbes.com\/sites\/brettowens\/2018\/09\/21\/how-to-grab-massive-cash-dividends-from-amazons-landlords\/#2061e0887103\" target=\"_blank\" rel=\"noopener\">25 times its earnings<\/a>\u00a0\u2013 not in the entire history of the company. It doesn\u2019t need to attract investors, so why spend the money?<\/p>\n<p>It also doesn\u2019t look like Amazon is slowing down anytime soon. Bezos seems to be on a mission to conquer the entire\u00a0<a href=\"https:\/\/seekingalpha.com\/article\/4209223-6-reasons-just-bought-amazon-non-dividend-stock-plan\" target=\"_blank\" rel=\"noopener\">capitalist world<\/a>.<\/p>\n<p>His company is just getting started in so many different markets and industries \u2013 including\u00a0<a href=\"https:\/\/finance.yahoo.com\/news\/amazon-plans-grocery-store-business-175411638.html\" target=\"_blank\" rel=\"noopener\">grocery stores<\/a>\u00a0\u2013 that the potential for growth is exponential. Moreover, Amazon has the ability to shift its investments as demand is realized.<\/p>\n<p>Some aspects of the company, like its web services and its marketplace, are self-sustaining. AWS lets companies of all sizes leverage the cloud on an as needed basis.<\/p>\n<p>Unless Amazon messes up, there is no reason for its customer companies to switch teams. The marketplace is no different. As long as people turn to Amazon, businesses will want to sell their products there.<\/p>\n<h2>Amazon Stock Dividend: The Bottom Line<\/h2>\n<p>It is unlikely that\u00a0<strong>Amazon [<a href=\"https:\/\/financhill.com\/search\/charts\/AMZN\">NASDAQ: AMZN<\/a>]<\/strong> will offer a dividend anytime soon, but that doesn\u2019t mean the company doesn\u2019t deserve a place in your portfolio. While investing in the online marketplace giant won\u2019t be right for every investor,\u00a0<strong>Amazon [<a href=\"https:\/\/financhill.com\/search\/valuation\/AMZN\">NASDAQ: AMZN<\/a>]<\/strong> could be part of a successful investing portfolio.<\/p>\n<p>Before you open a position, make sure to evaluate how much you believe in the company\u2019s future and do your best to buy on a dip. Share prices for this company do flex quite a bit in response to different news. Being patient and buying on a downturn is smart.<\/p>\n","protected":false},"excerpt":{"rendered":"<p>Dividend stocks play an important role in many investor portfolios. These cash payments are made on a regular basis to shareholders and provide a way for investors to share in a company\u2019s profits. Some people use them for income, while others reinvest them, buying more stock and reaping more dividends. It adds up. According to\u00a0Santa [&hellip;]<\/p>\n","protected":false},"author":2,"featured_media":314795,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"content-type":"","jetpack_post_was_ever_published":false,"_jetpack_newsletter_access":"","_jetpack_dont_email_post_to_subs":false,"_jetpack_newsletter_tier_id":0,"_jetpack_memberships_contains_paywalled_content":false,"_jetpack_memberships_contains_paid_content":false,"footnotes":"","jetpack_publicize_message":"","jetpack_publicize_feature_enabled":true,"jetpack_social_post_already_shared":true,"jetpack_social_options":{"image_generator_settings":{"template":"highway","enabled":false},"version":2}},"categories":[22],"tags":[],"class_list":["post-314794","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-investing"],"jetpack_publicize_connections":[],"jetpack_featured_media_url":"https:\/\/financhill.com\/blog\/wp-content\/uploads\/2019\/03\/amazonstock.png","jetpack_sharing_enabled":true,"jetpack_shortlink":"https:\/\/wp.me\/p9czeV-1jTk","_links":{"self":[{"href":"https:\/\/financhill.com\/blog\/wp-json\/wp\/v2\/posts\/314794","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/financhill.com\/blog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/financhill.com\/blog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/financhill.com\/blog\/wp-json\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/financhill.com\/blog\/wp-json\/wp\/v2\/comments?post=314794"}],"version-history":[{"count":2,"href":"https:\/\/financhill.com\/blog\/wp-json\/wp\/v2\/posts\/314794\/revisions"}],"predecessor-version":[{"id":314812,"href":"https:\/\/financhill.com\/blog\/wp-json\/wp\/v2\/posts\/314794\/revisions\/314812"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/financhill.com\/blog\/wp-json\/wp\/v2\/media\/314795"}],"wp:attachment":[{"href":"https:\/\/financhill.com\/blog\/wp-json\/wp\/v2\/media?parent=314794"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/financhill.com\/blog\/wp-json\/wp\/v2\/categories?post=314794"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/financhill.com\/blog\/wp-json\/wp\/v2\/tags?post=314794"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}