Dividends and Amazon’s outlook dims after record holiday quarter

At the end of January, Amazon reported on its quarter and if you examined the US part of the report you would smile, because Amazon continues to outperform. When you looked at Amazon there are different parts of the company and shipping the boxes is not the biggest.

Amazon Prime which people pay subscription fees to have free shipping and access to various Amazon platforms saw fees climb 25% to $4 billion. Those fees are paid every year which translates in $4 billion in cash flow for Amazon.

Amazon is very good at shipping, and over the years it has become the shipping channel for third parties, an example is Nike. They ship through Amazon, more than half of the products sold on Amazon came from third parties. (This is similar to department stores or grocery stores – selling other companies goods). The companies do all the work to push the sales including advertising on Amazon. Eventually margins can rise.

Amazon is involved in the cloud and has the largest market share, Microsoft is second.

Amazon sells ads and compares with Google and Facebook for leadership in marketing and selling ads. The third parties and others pay for high placement in Amazon’s search results.

Away from the US, India is Amazon’s second biggest market but they are having problems with the government’s new regulations.

According to the article from Reuters, net sales for the 4th quarter rose 19.7% to $72.38 billion and beat analyst’s estimates. In North America sales were up 18.3% to $44.12 billion.

Linking to dividend paying stocks, Amazon continues to be a dominant force and if you buy the shares you expect to buy growth. Typically in the retail markets, the first quarter of the year is slower than the last quarter of the year, although over the years because of their logistical advantage Amazon has increased margins or make more money. Amazon had a good quarter, if you own the stock you should keep it, because as Amazon continues to do things well, because of Amazon Prime, shipping for 3rd parties, the cloud and its advertising, revenues over the year should be stable and growing.

There are more questions than answers, till the next time – to raising questions.

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