Amazon Breaks $3 Trillion Barrier Without Paying Dividends

Amazon is now one of five companies to have surpassed a market value of $3 trillion. While four of its peers, Nvidia, Apple, Alphabet, and Microsoft, pay quarterly dividends, Amazon remains an exception.

The e-commerce giant has never paid a dividend in its history, despite generating significant cash flow from operations. In fact, the company's free cash flow swung to an outflow of $7.6 billion over the trailing 12 months due to high capital expenditures.

According to Amazon's management, the reason for not paying dividends is that there simply isn't enough free cash flow left after spending on property and equipment. The company expects to spend around $220 billion this year, most of it aimed at artificial intelligence (AI) and cloud capacity.

CEO Andy Jassy recently stated that even $220 billion won't be enough to meet the company's demand for AI capacity in 2027. He believes that a dollar of AI capacity earns more than a dollar of payout ever could, which is why Amazon continues to prioritize its growth strategy over dividend payments.

Despite not paying dividends, Amazon has seen significant revenue growth from its cloud computing division, AWS, which rose 37% year-over-year to $42.2 billion in the second quarter. The company's operating income also climbed 43% year-over-year to $27.5 billion in the same period.

The stock price of Amazon has been around $276 as of this writing, with a price-to-earnings ratio of about 30 times over the next 12 months. While some may see this as expensive, others argue that a company growing revenue at rates like Amazon's can justify its valuation.