Many technological businesses distribute dividends, either in the form of stock or cash, to their shareholders on a regular basis. The parent company of Google, Alphabet (GOOGL), is not one of them, despite the pressure of investors and industry experts to pay them.
How much dividend does Google pay per share?
I’ve heard a lot of complaints about Google and its holding company Alphabet Inc. not paying dividends and that they should start doing so and restore funds to their investors. Even so, Google/Alphabet has already started paying out dividends to shareholders. Which brings us to our next question: how much money does Google give back to its shareholders?
No cash dividends have ever been paid out by Google (Alphabet). As a result, in 2018, it returned $9.1 billion to shareholders, or 30 percent of its net profits. When it came to returning money to shareholders, it did use cash buybacks instead of dividends.
To see how much Google/Alphabet paid out to its shareholders each year and how much of that was cash dividends versus cash buybacks, see the table below.
Alphabet’s (Google’s) Cash Payouts to Shareholders by Year
If you claim that Google does not pay out dividends to shareholders, you are incorrect. That’s just the way they choose to do it, like many other companies these days have done it.
Let’s take a closer look at how much it pays out compared to what it can and how that compares to other companies and the market as a whole.
Does Netflix pay dividends to shareholders?
However, other businesses do not now pay dividends and may not do so for a long time (or ever). Excess capital may be reinvested in the business rather than returned to shareholders when a company is still in its early stages of development or growth. In the end, every dollar paid out in dividends is a dollar less available to invest in the company’s growth.
When it comes to dividends, Netflix (NFLX) is a wonderful example because the firm has not paid one since it went public in May 2002. Non-dividend-paying equities aren’t always bad investments, but they aren’t the only ones. Netflix, for example, may be a good choice for investors who are more concerned with capital gains than dividends. Over the previous five years, Netflix shares have returned an annualized 43 percent, which is a massive return for investors.
Over the past decade, many tech stocks have started paying dividends as they have matured and started generating substantial profits. When will Netflix pay a dividend to shareholders?
Business Overview
Netflix is a media behemoth with more than 200 million subscribers in more than 190 countries. Despite the fact that Netflix provides a vast range of already aired television shows and films, the firm also creates original material.
As a start-up, the company began by mailing DVDs to customers. Its focus has turned in recent years to online streaming services. Customers have access to Netflix’s catalog of television shows, documentaries, and feature films, which spans practically all genres. To further its success in building its subscriber base at a rapid rate, Netflix has invested extensively in its own original content.
As a result, revenue has grown enormously over time. During the period from 2016 through 2020, Netflix’s annual revenue nearly tripled, reaching $25 billion in 2017. Although membership growth has slowed down in recent years following a period of outsized expansion, this is to be expected.
In 2016, earnings per share were $0.43; by 2020, earnings per share were expected to be $6.08. Because of this, investors may assume that Netflix might contemplate paying out a dividend, although the firm has not done so to far. This could be explained in part by the fact that the company has yet to achieve significant profitability. In 2021, Netflix is expected to generate $10.38 per share in earnings, a yield of about 1.8 percent.
If it wanted to create a 1.8% dividend yield, it would have to distribute nearly all of its yearly earnings-per-share, which it would never do because it would deprive the firm of income it might use to invest in growth and retire debt. Since Netflix’s content costs are so expensive, the company’s profits yield is low and it does not pay a dividend.
Reasons For Paying A Dividend
It is not uncommon for corporations to issue dividends as part of their capital allocation strategy. This has been the case for several corporations, such as Dividend Aristocrats like Coca-Cola (KO) and Johnson & Johnson (JNJ). Both Coca-Cola and Johnson & Johnson are members of the Dividend Kings list.
There has been a dramatic increase in the number of corporations that have paid dividends in recent years. Technology companies, for example, used to spend a lot of money to build their company, but now they utilize dividends as a way of returning cash to shareholders. When Apple and Cisco Systems began paying out dividends in the last decade, their shareholders expected it, and their business models consistently generated free cash flow.
Investors have a reasonable expectation that corporations will distribute dividends. During a slump in the stock market, dividends act as a safety net for investors. Dividend reinvestment allows investors to boost their total dividend income by purchasing additional shares at reduced prices. Dividends only serve to boost shareholder wealth when the markets recover.
For retirees, dividends can be a vital source of cash flow. Retirement investors might supplement their income through dividends. Even though a person is no longer receiving a paycheck from their employment, they still have to pay for the necessities of life. As a result, dividends can be a crucial part of a retirement strategy.
While dividend stocks like Coca-Cola and Johnson & Johnson have been around for decades, growth businesses like Netflix, which need to spend a lot of money on content in order to develop, aren’t. If Netflix wants to grow its subscriber base in the future, this is a must-have expense.
Amazon (AMZN), YouTube, Hulu, and The Walt Disney Company (DIS) are all competitors in the entertainment industry, and it is probable that spending rates will only climb from here. As a result, Netflix may never pay out a dividend to stockholders.
Will Netflix Ever Pay A Dividend?
Paying a dividend has a number of advantages, but there are just as many reasons not to. If you want to pay a dividend, you’ll need enough cash on hand to meet the payments. If a company, like Netflix, does not have a steady stream of free cash flow, it will be difficult for it to make a quarterly dividend payment to shareholders.
In 2021, earnings-per-share are predicted to surpass $10. A dividend payment would be technically possible, but Netflix prefers to invest its free cash flow on new customers rather than dividends.
Netflix, as a result, has been unable to create positive growth in free cash flow. While Netflix typically has negative free cash flow, the company now expects free cash flow to be approximately breakeven this year.
Netflix’s high capital expenditures need borrowing from the debt markets. The firm’s balance sheet has been negatively damaged by this, making it even more difficult for the corporation to pay a dividend. Netflix had $14.9 billion in long-term debt and $7.7 billion in cash and equivalents at the end of the most recent quarter.
A dividend payment to Netflix’s shareholders has become increasingly challenging due to the company’s rising level of interest-bearing debt. For Netflix, these factors suggest that a dividend may not be an optimal choice, given the company’s continued emphasis on capital expenditure and debt repayment.
Final Thoughts
A company’s capital allocation strategy is not fixed. An investment policy can be modified over time. Paying a dividend may become an option for a company as it matures. When a firm is consistently profitable, management may determine that a dividend is a good way to attract new investors and reward current owners.
As far as Netflix dividends are concerned, it’s feasible but not likely.
As of today, Netflix has a lot of competition, so it has to spend all of its money on original programming. Investors should not expect dividend payments from the company any time soon, as the company has a substantial amount of debt on its balance sheet.
However, there are other reasons to see Netflix as a viable investment. Subscribers and revenue are increasing as the company’s streaming service becomes more popular throughout the world. Netflix has the potential to continue to be a strong growth stock because of these factors. Netflix, however, is unlikely to ever pay a dividend because of its high capital requirements and high debt levels.
Other stocks that don’t now pay dividends can be found in the following articles:
Why is Google not giving dividends?
It is also important to note that one of the main reasons why Google does not currently pay a dividend is because the company wants to keep expanding into new areas. Even while its competitors may have gotten comfortable, Google stands out as an organization that has showed no intention of slowing down and is known to constantly experiment with new ideas (despite many failing). The following is a brief rundown of a few of the company’s current endeavors:
- Recently, Google unveiled a prototype of a self-driving car that requires no action from its passengers. In spite of the lack of information about the product’s long-term strategy, many people were drawn to the product’s first successes.
- This is where Google’s “crazier” projects are being worked on in a different building from the company’s headquarters. Driverless cars, smart contact lenses and high altitude balloons to deliver internet access are just a few examples of the new technologies that have emerged in recent years.
- Google Glass: The recently released Google Glass is a wearable device that combines smartphone technology into a pair of spectacles.
For all of these programs, Google spent more than 13 percent of its profits on R&D in 2013, which is a lot of money.
Does Tesla pay a dividend?
Tesla has never paid a dividend to shareholders of its ordinary shares. We do not expect to pay any cash dividends in the near future because we plan to use all future earnings to fund future growth.
Why is Google’s stock price so high?
At the beginning of 2021, Alphabet Inc. Class A shares were trading for roughly $1,800.00 each. At its lowest point of the year, it hit a 52-week low of $1,008.87 due to the coronavirus crisis. On 2020, it had a value of approximately $1.2 trillion in the market.
As a leading player in online search, mobile OS, and online video, Google generates the majority of its ad revenue from advertising.
Advertisers like Facebook and Google have battled in the same way (FB). In the second quarter, it recorded its first-ever year-over-year sales decline. However, by the end of the third quarter, it had recovered and continued to rise.
The company’s stock trades at a multiple of 35 times earnings. When Google became a part of Alphabet in 2015, it underwent an extensive corporate restructuring. This ensures that YouTube and Google, for example, are not merged.
It is, however, a more symbiotic relationship than you might have expected. Using YouTube’s Partner Program, which pays via Google AdSense, video creators can earn money. In fact, the corporation is being scrutinized along with Facebook (FB) and Amazon (AMZN) to see if it needs to be separated (AMZN).
As even Epic’s class action against Apple indicates, Google’s Play Store may be in trouble in the future. Although Google’s next stock split may be the result of compelled regulatory action, this has not been done before in American history.
Does Starbucks dividend?
Is Starbucks a dividend-paying company, or does it not? Starbucks does, in fact, pay a dividend on its common stock, at a rate of 41 cents per share each quarter.
