Why I Changed My Mind on Amazon

Three quick questions?

1) Are you one of the millions that shop on Amazon and just love getting that package delivered exactly on time?
2) Do You want to have more money in the future?
3) Do you own share of Amazon (AMZN)?

amazon books on stock investing

When it comes to companies as large and life-altering as Amazon.com, you have to make an exception to the Safe Investing Rules. The reason I always avoided buying Amazon stock for years is that they do not pay cash dividends (even though I’ve been watching and hoping it would have a huge correction almost every business day). I even sell amazon books on stock investing!

My strict rules when I buy a stock are as follows:

1) The companies must be profitable and since my background is accounting, I am an expert at reading, understanding, and knowing financial statements. A lot of people just look at the bottom line or listen to a financial news blip. However, a company may show a net loss on its income statements, but a closer look at their cash flow statements will show that they have very good cash flow from operating activities and are very profitable. And they know how to legally NOT pay any taxes by growing the company (by the way, Amazon is an expert at doing this).

2) The companies must produce goods or services that millions of people use in their daily lives. For example, hundreds of millions of people in America have a Visa (V) or a MasterCard (MA) in their purse or wallet and they use them to purchase goods and services. WShoes

3) The companies I endorse must pay, at the very least, annual dividends that you can reinvest in the form of additional shares of the same company stock at zero cost (that means no commission). Quarterly dividends are even better, but very few companies do this. My very favorite is a company that pays monthly cash dividends, such as Reality Income (O) .

4) They must be companies that have understandable “how and what” in what they do in

their business—the more basic, the better. For example: a shipping company, Navios Maritime Partners L.P. (NMM), brings huge bulk goods to and from countries around the world. Another company that has an important but simple mission is a freight train line, like Norfolk Southern Corporation (NSC),  and CSX Corporation (CSX)  which moves huge quantities of goods from the Midwest to Florida.

5) And most importantly, I have to believe that the companies will be around, at a minimum, for another twenty-five-plus years—Wal-Mart or Coca-Cola, for example.

Amazon surely fits all the above-mentioned safer investing rules, except they do not pay dividends as of yet. However, they have a unique CEO/leader in Jeff Bezos, who is a true visionary and has a very long-term view. Bottom line/net income is not his main concern; he is mainly concerned about having happy repeat customers and capitalizing on niche markets, such as now striking a deal with the U.S. Postal Service (USPS) to deliver goods on Sundays when most people are at home. This is the kind of creative, out-of-the-box thinking that keeps a company ahead of the competition and moving forward. They have dominated in book sales online including my amazon books on stock investing.

Here are some financial numbers on Amazon you simply cannot ignore:

Top line Revenue:      Year 2009: $24.5 billion

Year 2010: $34.2 billion

Year 2011: $48 billion

Year 2012: $61 billion

Year 2013: $74.4 billion

Year 2014: $88.9 billion

That kind of growth rate is simply hard to be maintained, but if they can grow that well in a recessionary period, they have a very good chance to improve as the U.S. and world economies get better. It’s just a matter of time before the board of directors starts paying cash dividends.

In summary, Amazon is one of those stocks you have to hold in the very long-term part of your investment portfolio. The grandkids or your much younger relatives will be very happy you did.

More Dividend Investing 101:

Here is a very good video on dividend dates:

Ex-Dividend Date – Video | Investopedia http://www.investopedia.com/video/play/ex-dividend-date/

 

Sherwin Brown

About Sherwin Brown

Sherwin has been an entrepreneur since he was twelve years old. He currently teaches, writes, and speaks to people about how to improve and safeguard all aspects of their financial portfolios.

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