Last Updated on 02/19/2021 by GS Staff
Q: Does Alibaba pay dividends to shareholders?
No, Alibaba (BABA) does not pay dividends. In the most recent annual report, the company states that they have never paid a dividend on ordinary shares since the launch of the business.
Why doesn’t Alibaba pay dividends? The company states the following in the 2020 annual report,
We have no present plan to pay any dividends on our ordinary shares in the foreseeable future. We intend to retain most, if not all, of our available funds and any future earnings to operate and expand our business.Alibaba Annual Report, FY 2020
You should not invest in Alibaba with the expectation that a dividend will be paid. There is no indication that this will happen in the future. However, this does not mean that the board of directors will never approve a dividend. It is just speculation at this time.
Alibaba Stock Repurchase
Alibaba does have a stock repurchase program that was authorized by the board of directors in May 2019. The initial dollar amount that was approved to use for repurchases was $6 billion. However, this has recently increased to $10 billion. The buyback is authorized until the end of 2022.
The stock repurchase program should help reduce the shares outstanding and, in theory, increase earnings per share. However, Alibaba’s share count actually increased during its last buyback programs from 2015 to 2019.
As fool.com points out, Alibaba was authorized to use $10 billion for repurchases over this period, however, they only used $4.4 billion. Meanwhile, dilution occurred because of events like stock-based compensation, which increased the shares outstanding.
Competitors Dividend Policies
Amazon (AMZN) and JD.com (JD) are the two closest competitors to Alibaba. Both companies are using nearly all of their available funds for business growth. Similar to Alibaba, they do not pay dividends.
Alibaba is still in the growth stage despite its hefty market valvuation. It is no surprise that they have no immediate plans to pay a dividend as its cash is used to pay for the company’s expansion. However, an argument could be made that shareholders would be better served with a dividend payment rather than authorizing stock buybacks for billions. This is especially true since there is no guarantee that Alibaba will tap the full $10 billion to use for buybacks.
Featured Image Credit – Daniel Cukier/flickr