Is Amazon a Great Dividend Stock?
One measure of a great dividend stock is the sustainability of its payout. When the percentage of a company's income paid out to shareholders as dividends gets too high for too long, it's a clear indicator of trouble. When the payout ratio tops 100%, the company is dipping into cash balances (or even go into short-term debt) to pay those dividends. Eventually, it will be forced to reduce or suspend the payout.
Another measure of a great dividend stock is whether the company is growing its base of repeat customers. This suggests the customers highly value the company's products and services. It also helps the company increase revenue and net earnings over the long run. That consistency helps it maintain dividend payouts and maybe even increase its dividends without adversely altering the dividend payout ratio.
E-commerce giant Amazon (NASDAQ: AMZN) does not currently pay a dividend. But based on these measures, it certainly has real potential to be a great dividend stock. Let me explain why.
Source Fool.com
