Amazon (NASDAQ:AMZN) is unique among trillion-dollar stocks on the S&P 500. It is the only one that doesn’t return capital to shareholders with a dividend. Admittedly it is a small group of companies, but the e-commerce giant’s refusal to pay a dividend contrasts sharply with its financial strength and evolving maturity.

Its fourth-quarter results showed it ended the year with over $101 billion in cash, equivalents, and short-term investments, and it generated $38.2 billion in free cash flow, up 4% year-over-year. With significant financial resources available, it makes a compelling case that it is high time Amazon joined its mega cap tech peers in paying a dividend in 2025. 

Amazon’s growing war chest

Amazon’s liquidity is formidable and after years of reinvesting heavily in e-commerce, Amazon Web Services (AWS), and other ventures, Amazon’s cash generation now outpaces its immediate capital expenditure needs, notwithstanding its $52.6 billion in long-term debt. 

Operating income hit a record $68.6 billion in the fourth quarter, up 86% from last year, with AWS still representing the largest percentage of the total, or 58%. The cloud computing platform saw net sales rise almost 19% in the period.

This surplus mirrors peers like Microsoft (NASDAQ:MSFT) and Apple (NASDAQ:AAPL) that are able to balance growth with paying dividends. It highlights Amazon’s capacity to do the same.

The argument for a dividend

First, a dividend would broaden Amazon’s investor appeal. Tech giants like Alphabet (NASDAQ:GOOG)(NASDAQ:GOOGL) and Meta Platforms (NASDAQ:META) initiated payouts in 2024, recognizing that dividends attract income-focused investors and not just growth-chasing speculators. 

Amazon’s stock, trading under $200 a share with a $2.1 trillion market cap, offers no yield, limiting its allure compared to Microsoft’s 0.8% or even Nvidia’s (NASDAQ:NVDA) 0.03%. A modest 25% payout ratio on projected 2025 earnings of $6.34 per share and yielding only 0.7%, would signal stability without crimping growth.

Second, Amazon’s business has matured. Once a cash-burning disruptor, it now dominates e-commerce with a 37.6% U.S. market share and a 30% share of the global cloud computing market. As noted above, AWS alone drives nearly 60% of its operating income, providing a steady profit engine. 

Unlike Meta’s metaverse or Alphabet’s moonshots, Amazon’s core segments — online retail and cloud — generate consistent cash, reducing the need to plow every dollar back in. A dividend would reflect this transition from hyper-growth to sustainable profitability, aligning with peers who pay out 20% to 50% of their free cash flow.

Third, shareholder pressure is mounting. Amazon authorized $10 billion in share buybacks in 2022 and spent $6 billion that year. However, it bought back no additional AMZN stock in either 2023 or 2024. Amazon’s capital return strategy feels half-hearted at best. 

Dividends offer a clearer commitment, especially as Amazon’s share count grew 6% over five years, diluting investors. Offering shareholders a yield equal to or even slightly exceeding the average S&P 500 dividend yield of 2.2%, would be better than its sporadic repurchases.

Pushing back again reinvestment 

Amazon’s CFO, Brian Olsavsky, has long argued that reinvesting in AI and growth trumps dividends. “Our first priority,” he once said, “is to invest in, to support the growth opportunities and long-term investments within our businesses, and generally we still have many opportunities for that capital to use that would generate meaningful returns.”

Although Amazon has capital intensive businesses, Microsoft manages to fund AI at scale while yielding 0.8%. Amazon could match this with just a fraction of its cash flow. It recently committed $100 million to housing in Bellevue, Washington. It is certainly a worth pledge, but it also shows cash isn’t a constraint. Why can’t Amazon allocate a fraction to shareholders?

The time to act is now

Amazon’s $101 billion cash pile in 2025, paired with almost $40 billion in free cash flow, screams excess capacity. A dividend that yields just 0.7% would appease investors and signal confidence without stunting innovation. 

As the last trillion-dollar holdout, Amazon risks alienating shareholders when peers like Meta prove dividends and growth coexist. This year, with more than sufficient financial firepower, it’s time for Amazon to pay up.

 

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