Like Alphabet and Meta... Amazon Also Likely to Pay Dividends Soon

Amazon, the Only One Among the US Big 5 Tech Companies
Not Paying Dividends, Possible Payout Due to High Cash Reserves

The world's largest e-commerce company, Amazon, is expected to announce dividend payments within the next few quarters. Among the five major U.S. big tech companies (Apple, Microsoft, Alphabet, Amazon, Meta Platforms), Amazon is the only one that does not pay dividends to its shareholders.

On the 25th (local time), Bloomberg cited several experts, including Andrew Zampotis, portfolio manager at Ami Asset Management, reporting that Amazon is likely to decide on dividend payments within a few quarters. Amazon's Q2 earnings announcement is scheduled for the 1st of next month. However, the outlet added that it is uncertain whether dividend payments will be announced at that time.

The reason for the analysis that Amazon, which has been criticized for being stingy with shareholder returns, will implement dividend payments is due to the massive cash reserves Amazon has accumulated. Last year, Amazon's cash holdings amounted to $86.8 billion, and it is expected to surpass $100 billion this year. Big tech companies, including Amazon, have already secured market dominance and can generate substantial free cash flow without incurring large fixed costs.

Originally, big tech companies would use this to conduct mergers and acquisitions (M&A), but in recent years, major regulatory authorities such as those in the U.S. and the European Union (EU) have imposed restrictions due to antitrust concerns, leaving few suitable places to spend the money. Prior to this, Meta Platforms and Alphabet decided to pay dividends, leading to speculation that Amazon will join this trend.

The size of the dividend is not expected to be large. However, just as Alphabet and Meta Platforms saw their stock prices surge significantly when they confirmed dividend payments, Amazon's stock price could show a similar trend.

Recently, decisions by big tech companies to pay dividends have been viewed as positive market factors. In the past, dividend payments by big tech, whose lifeblood is sustained growth, were sometimes interpreted as a signal of limits. But now, it is seen as the company having confidence in its long-term cash generation and business outlook.

However, Brian Szytel, managing director and partner at Bansen Group, pointed out that Amazon's operating profit margin, with e-commerce as its main business, is lower compared to other big tech companies, which is a variable in the dividend payment decision. Nevertheless, there is a counterargument that margins will continue to improve since Amazon's cloud business, which acts as a cash cow, shows an operating profit margin of about 40%.