Is Amazon Poised for Major Shift With Potential Dividends and Share Buybacks on the Horizon?

Amazon.com Inc AMZN, historically known for its conservative approach to returning capital to shareholders, can potentially change its strategy due to its substantial cash reserves. 

With a record-breaking $32 billion in free cash flow in 2023 and expectations to nearly double that in 2024, Amazon has mounting cash reserves, surpassing $86 billion by the end of 2023.

Amazon remained engaged in initiatives to unlock shareholder value, such as restructuring its grocery and cloud unit Amazon Web Services (AWS) strategies.

Unlike its counterparts such as Alphabet Inc GOOG GOOGL and Meta Platforms Inc META, which have undertaken significant share buybacks totaling billions of dollars, Amazon has refrained from such actions, with its last buyback amounting to a modest $10 billion in 2022, Bloomberg reports. 

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However, analysts anticipate a shift in Amazon’s capital-return policy, foreseeing potential share buybacks and even the introduction of a dividend, signaling a departure from its traditional reinvestment strategy under the leadership of CEO Andy Jassy.

Despite its conservative approach to capital returns, Amazon’s stock has performed well, outpacing the Nasdaq 100 and reaching a market value of $1.9 trillion. 

Analysts speculate on the possibility of Amazon initiating share buybacks in the tens of billions of dollars, with dividends seen as less likely in the near term due to the company’s focus on continued growth.

While some investors advocate for capital returns, others, like Cyrus Amini of Helium Advisors, prioritize continued spending to safeguard Amazon’s market dominance amid increasing competition.

Amazon stock gained over 77% in the last 12 months. Investors can gain exposure to the stock via SPDR Select Sector Fund – Consumer Discretionary XLY and ProShares Online Retail ETF ONLN.

Price Action: AMZN shares are up 0.92% at $184.10 on the last check Thursday.

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Disclaimer: This content was partially produced with the help of AI tools and was reviewed and published by Benzinga editors.

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