Should Amazon Stock Follow The ‘Magnificent 7’ Trend and Start Paying a Dividend?

Already, Meta Platforms (META) and Alphabet (GOOG) – two of the "Magnificent 7" constituents – have initiated dividends in 2024. Chinese tech giant Alibaba (BABA) - the “Amazon of China” - also initiated a dividend in late 2023, after years of underperforming markets. Is it time for Amazon (AMZN) to follow that same lead and start paying a dividend to shareholders? In this article, we’ll examine whether or not the commerce giant should initiate a dividend.

To begin with, we should understand that companies can return excess cash to shareholders through dividends or share repurchases. While both types of payouts are discretionary and based on the management’s assessment of the macro environment and the company’s cash flows, dividends are much more stable than buybacks.