Amazon sitting on mound of cash

Investors are expecting company to buy back shares or maybe even start paying a dividend

For years, Amazon.com Inc. has been the stingiest among tech megacaps to give back capital to shareholders. Now, it’s generating so much cash that some on Wall Street are anticipating more generous returns.

After a record haul of $32 billion (U.S.) in free cash flow last year, Amazon is projected to nearly double that in 2024, according to data compiled by Bloomberg. With Big Tech acquisitions increasingly facing regulatory opposition, Amazon has fewer options on how it chooses to deploy that cash, according to Robert Schiffman, a senior credit analyst at Bloomberg Intelligence.

“This suggests not only rising share buybacks, but a more aggressive capital return policy that could include a dividend,” Schiffman said. “If returns don’t increase, cash balances could soar above $100 billion later this year.”

Amazon had more than $86 billion in cash at the end of 2023.

For most of its three decades in existence, Amazon has opted to plow its cash back into the business. The last buyback was for $10 billion in 2022, which is a pittance compared with similar sized peers.

In 2023, Alphabet Inc. repurchased more than $60 billion in shares, according to data compiled by Bloomberg. Facebook-parent Meta Platforms Inc. spent more than $20 billion on buybacks in the same period and in February pledged an additional $50 billion, while initiating its first quarterly dividend.

Amazon, by contrast, didn’t buy back any shares in 2023. A change in its capital-return policy would signal a shift as the company evolves under chief executive officer Andy Jassy, who took the reins from co-founder Jeff Bezos in 2021.

Amazon shares have managed to outperform even in the absence of big buybacks. The stock has climbed 21 per cent this year, including a 0.7 per cent gain on Thursday, pushing its market value above $1.9 trillion as analysts continue to hike profit estimates and traders grow increasingly optimistic about artificial intelligence helping to reinvigorate growth at Amazon Web Services.

The Nasdaq 100 has gained eight per cent over the same period.

Still, while Amazon is on the cusp of setting a new all-time high, it’s alone among the five biggest U.S. tech companies that isn’t yet in record territory. Microsoft Corp., for example, is trading about 20 per cent above its 2021 record, while Meta is up more than 30 per cent from its previous peak in the same year.

Naveen Jayasundaram, senior research analyst at ClearBridge Investments, expects Amazon to announce a buyback in the tens of billions of dollars sometime this year, but sees a dividend as unlikely.

“I think Amazon views itself as being earlier in the growth cycle compared with Alphabet and Meta, so I would be surprised if we got a dividend this year,” Jayasundaram said. “However, it does seem like something that could come in the next four to five years.”

Amazon had more than $86 billion (U.S.) in cash at the end of 2023