No dividends are paid out by Spotify (NYSE: SPOT).
Has Google ever paid a dividend?
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.
Will Netflix ever pay dividends?
Other corporations, on the other hand, may not pay a dividend for a long time (or ever). In the early stages of a company’s development, reinvesting extra cash rather than returning it to shareholders is common. Since each dividend paid out reduces the amount of capital available for expansion, every dollar paid out represents a loss.
Since it went public in May 2002, Netflix (NFLX) hasn’t paid a dividend and hasn’t paid one since. Not all non-dividend-paying companies are necessarily bad investments. Netflix, for example, is a great option for investors who are looking for long-term returns rather than short-term dividends. During the previous five years, Netflix shares have returned an annualized 43 percent to investors, which is a massive return for those who invested.
Several tech stocks have started paying dividends in recent years as they have matured and started generating substantial earnings. When will Netflix pay a dividend to shareholders?
Business Overview
Netflix has more than 200 million subscribers in more than 190 countries. While Netflix provides a vast selection of second-run television shows and movies, the firm also creates its own original material.
As a start-up, the company began by mailing DVDs to customers. Internet streaming services have become increasingly important to the company in recent years. With Netflix, you can watch a wide variety of TV shows, documentaries, and feature films from all around the world. 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. In recent years, membership growth has slowed down a bit, but this is to be expected following such a long period of rapid expansion.
Earnings per share increased from $0.43 in 2016 to $6.08 in 2020, according to the company’s financial forecast. Because of this, investors may assume that Netflix might contemplate paying out a dividend, although the firm has not done so to far. In part, this can be attributed to the fact that the corporation isn’t making a lot of money. Netflix is expected to earn $10.38 per share in 2021, which equates to a 1.8 percent earnings yield.
To achieve a dividend yield of 1.8 percent, the firm would have to distribute nearly all of its yearly earnings-per-share, which of course it would not do because that would deprive it of cash to spend in expansion and debt repayment. 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
Dividends are an important aspect of many organizations’ capital allocation strategies. Several firms, such as Coca-Cola and Johnson & Johnson, are known as “Dividend Aristocrats” because they have consistently raised their dividends over the course of several decades. As a matter of fact, both Coca-Cola and J&J are members of the prestigious Dividend Kings list,
Dividends are now being paid by even corporations who were previously unwilling to do so. When it comes to technology companies, this is especially true. Rather than investing substantially to expand their operations, these firms are instead returning capital to shareholders through dividends. Free cash flow generated by the business strategies of companies like Apple (AAPL) and Cisco (CSCO) prompted them to begin dividend payments in the recent decade.
It’s easy to see why these investors seek dividends from firms. Dividends act as a safety net in times of market turmoil since stock values plummet and dividends are paid out. 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 are an important source of income. It is possible for retiring investors to recoup some of their lost income through dividends. Even if an individual no longer receives a salary from their employment, they must nonetheless cover their basic living needs. Because of this, dividends can be a crucial part of a retirement strategy.
However, growth firms like Netflix vary from time-tested dividend stocks like Coca-Cola and Johnson & Johnson in that they still need to spend enormous amounts of capital on content in order to build their businesses. Netflix will have to spend this money if it wants to keep and even expand its customer base in the future.
Because of Amazon’s (AMZN), YouTube’s (GOOG), Hulu’s (HULU), and Disney’s (DIS) competition in the entertainment business, the company’s expenditure rates are anticipated to climb in the future. Netflix may never pay a dividend to its shareholders because of this.
Will Netflix Ever Pay A Dividend?
Paying a dividend has its advantages, but it also has its disadvantages. A dividend payment necessitates sufficient cash flow to cover the payments. Netflix, for example, would have a difficult time returning quarterly dividends to shareholders because it doesn’t generate regular free cash flow.
Revenue per share is predicted to top $10 by the end of the decade in 2021. Even though Netflix could theoretically pay a dividend based on this, the firm continues to spend its cash flow on growth projects in order to expand its subscriber base.
Netflix has been unable to create positive free cash flow growth as a result of this. In fact, Netflix’s free cash flow is expected to be about breakeven this year, which is an increase above the company’s usual free cash flow of a deficit.
Debt markets are also necessary for Netflix’s spending because of the company’s huge capital expenditures. The firm’s balance sheet has been negatively harmed by this, making it even more difficult for the corporation to pay a dividend in the future. According to Netflix’s latest financial results, the company has $14.9 billion in long-term debt compared to $7.7 billion in cash and other assets.
Netflix’s ability to pay shareholders a dividend has been hampered by this increase in interest-bearing debt. Netflix’s investment spending and debt repayment are more important to management than a dividend, so a dividend may not be the best option for the company.
Final Thoughts
A company’s capital allocation strategy is not fixed. An investment policy can be modified over time. Growing companies may come to the conclusion that paying dividends is an efficient use of their capital as they develop. Once a company has established a track record of profitability, the management may decide that paying a dividend is a good way to both reward existing shareholders and attract new ones.
Netflix could one day follow in the footsteps of companies like Apple, Cisco, and others by declaring a dividend, but this is unlikely.
As of today, Netflix has a lot of competition, so it has to use every dollar it has to keep making original content. Investors shouldn’t expect dividend payments from the corporation any time soon because of the company’s enormous debt load.
Netflix may still be a solid investment for a number of reasons. Subscribers and revenue are increasing as the company’s streaming service becomes more popular throughout the world. These are some of the reasons Netflix may remain a lucrative growth stock in the future. Netflix, however, is unlikely to ever pay a dividend because of its high capital needs and high debt levels.
Other stocks that don’t now pay dividends can be found in the following articles:
What is Netflix dividend yield?
Netflix’s (NFLX) dividend payout and yield history, going back to 1971. As of November 30, 2021, Netflix’s (NFLX) current dividend payout is $0.00. On November 30th, 2021, Netflix’s dividend yield was 0.00 percent, according to the latest available data.
How do I know if I get paid dividends?
Some of a company’s profits are given to shareholders in the form of a dividend. A dividend check is the most common method of distributing dividends. But they may also receive more stock as compensation. A cheque is mailed to investors a few days following the ex-dividend date, which is the date when the stock begins trading without the previously declared dividend.
Dividends can also be paid in the form of new shares of the company’s stock. Dividend reinvestment is a popular feature of dividend reinvestment plans (DRIPs) offered by both private corporations and mutual funds. The Internal Revenue Service (IRS) always considers dividends to be taxable income (regardless of the form in which they are paid).
What is Coca-Cola dividend?
In addition to the dividend of $0.42 per share, Coca-quarterly Cola’s dividend yield is 3.07 percent. Over the past few years, the company’s dividend payout ratio, which is the percentage of earnings distributed to shareholders as dividends, has risen to more than 100 percent. Because eventually the company runs out of cash, a dividend payout ratio of more than 100% is unsustainable.
Does Tesla pay a dividend?
Tesla’s common stock has never been paid a dividend. Due to our long-term investment strategy, we do not anticipate paying out any cash dividends in the near future.
Does Starbucks dividend?
Is there a dividend paid on Starbucks’ stock? Definitely, Starbucks pays its shareholders in the form of a quarterly dividend of 41 cents per share.
