Tech giants like Facebook, Alphabet and Amazon are known for making revenue worth billions. Despite their stellar earnings, they haven’t paid dividends to their major shareholders. Instead, the available amount is readily used to amplify growth through acquisitions and capitalizing in other internal businesses.
A recent source suggests that these tech giants had generated a combined balance of more than $290 billion by the end of 2020. In spite of the magnificent balance, they did not give out dividends to its shareholders. In a recent news report, Facebook has gone on to say that it does not see itself giving out dividends “in the foreseeable future.” Moreover, Facebook also suggested that it will continue its practice of using the available capital to invest in its own businesses. On the other hand, Alphabet has adopted a similar approach in its report. However, they have termed it differently, stating that the capital would be used to “invest for the long-term growth of the business.”
David Bahnsen of the Bahnsen Group of Newport Beach stated that although he does believe the companies will eventually move to giving dividends to its shareholders; it will come several years later when they’re at a different stage in their growth cycle, or when they come to the sheer realization that shareholders have to be rewarded.
In an interview with Forbes, Dryden Pence of Pence Wealth Management of Newport Beach, Calif stated that Facebook, Alphabet and Amazon are still operating in their growth phase and the cash available is being used to take over other firms or invest in their own operations such as Amazon’s shipping service. He further elaborated from the perspective of the Facebook, Alphabet and Amazon: Giving a dividend will perhaps entice investors, but it won’t do the businesses well considering their current position in the growth cycle.
Pence also gave examples of several tech companies who mostly give out dividends at a later stage in their business. The only exception, in this case, is that of the reigning tech giant, Apple who gave out dividends regularly during 1987-1955; until it started finding it hard to stay afloat due to lack of cash. However, the company started paying out dividends again in 2012. Many other tech firms including big names like Microsoft and Cisco only started paying dividends in recent times, 2003 and 2011 respectively.