Why doesn’t Amazon pay dividends? , Smart Change: Personal Finance

Investors have been hesitant to buy for years heroine (NASDAQ:AMZN) stock because of its really high share price. But earlier this year, Amazon decided to split its stock, making the shares more affordable for investors.

If you want to add a add technical stock As a means of diversifying your portfolio or are looking forward to owning Amazon, you may want to consider taking that leap, now that the price per share is low. but one thing you Will not done Get what you want when you invest in Amazon. is a stream Dividend payment.

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While many companies that issue stock pay dividends regularly (with some steadily increasing their dividends over the years), Amazon does not pay dividends to shareholders. But that isn’t necessarily a bad thing.

Why doesn’t Amazon pay dividends?

Companies making money can choose what to do with it. Some may choose to reinvest all their profits into the business, while some may choose to share the money with stockholders in the form of dividend payments.

Neither approach is right versus wrong – it’s really just a matter of choosing a company’s strategy. Amazon’s business model has long focused on innovating and branching out into different corners of the market, as evidenced by its forays into the grocery and pharmacy business in recent years. As such, it’s easy to see why Amazon doesn’t pay a dividend — rather it will use its money to grow as a company.

One reason not to invest in Amazon is up to you. If your goal is to secure a steady stream of dividend income in your portfolio, then Amazon is clearly a poor choice. But if you’re willing to ignore that absent dividend and focus on growth, you may decide Amazon is a buy.

One thing to keep in mind is that companies that pay generous dividends don’t always experience the same growth as those that don’t. So what you lose in the form of absent dividend payments can be gained in the form of share-price appreciation — especially if you load up on Amazon shares now and hold them for several years.

Look at the big picture

Some investors get caught up in the process of chasing dividends to such an extent that they invest their money in companies that may not necessarily be a good fit for their portfolio. In addition, some people mistake high dividend payouts as a sign of financial health. This is certainly not always the case. If you’re interested in owning a piece of Amazon and realize after doing your research that it’s a solid business, the company’s lack of dividend payouts shouldn’t be the driving factor that prompts you to pass it on. Is.

Dividends are definitely a good thing because you can use them as cash or reinvest them. But you can make a lot of money over time by investing in quality businesses like Amazon, with growth as a clear top priority.

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John McKay, CEO of Whole Foods Market, a subsidiary of Amazon, is a member of The Motley Fool’s board of directors. Maury Backman There are positions in Amazon. The Motley Fool has Amazon status and recommends it. The Motley Fool has one Disclosure Policy,

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