The A to Z of Safer Investing; YES, Amazon.com (AMZN)
When it comes to sometimes as large and life altering as Amazon.com, you have to make an exception to the Safe Investing rules; as its logo says, “From A to Z”. The reason I have shied away from buying AMZN stock for years now (even though I have been watching and hoping it would have a huge correction almost every business day) is that they do not pay cash dividends.
My strict rules when I buy a stock are;
1) The company must be profitable: Since my background is accounting, I am an expert at knowing and reading financial statements … A lot of people just look at the bottom line or listen to the financial news blip on a company’s bottom line (net income or loss). However a company may show a net loss on their 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) It must be something that millions of people (the masses) use in their daily lives, for example: As you know, hundreds of millions people in America and the world have a Visa (V) or a Master Card (MA) in their purse or wallet and they use them to purchase goods and services.
3) They must pays at least an annually cash dividends where you can reinvest the cash in buying additional shares of the company stock at zero cost (that is no commission), quarterly is wonderful but even though very few companies do this, my very favorite is a company that pays monthly cash dividends. Such as Reality Income (O) and Enerplus (ERF) … YUMMY!
4) It must be a company where I understand the “how and what” they do with their business … The more basics the better—Example; a shipping company Navios Maritime Partners L.P. (NMM) brings huge bulk goods to and from countries around the world. A freight train Norfolk Southern Corporation (NSC) moves huge quantities of goods from the Midwest to Florida.
5) An most important, I have to believe that they will be around, at minimum, for another of 25 plus years, example Wal-Mart.
Well, with Amazon as mentioned above, they surely fit all the safer investing rules except they do not pays dividends as yet, however, they have a CEO/Leader Jeffrey Preston “Jeff” Bezos ,who is a true visionary and have 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 US Post office to deliver goods on Sundays when most people are at home).
Here are some financial numbers on Amazon you simple cannot ignore:
Top line Revenue;
Year 2009: $24.5 Billion: Year, 2010: $34.2 Billion: Year,
2011: $48 Billion: Year, 2012: $61 Billion
Yes that growth rate is simple hard to be maintained, but if they can grow that well in a recessionary period, I think they have a very good chance to improved as the US and the world economy gets better.
I also feel it just is a matter of time before the Board of Directors start paying a cash dividends.
In summary, AMZN is one of those stocks you have to stick with for the very long term part of your investment portfolio, the grandkids or your much younger relatives will be very happy you did.
MORE “lesson 101” on Dividend investing:
FYI here is a very good video on Dividends Dates, please click on the link below;
Thanks again and have a magical weekend,
What is your Vision?
“Vision without action is daydream. Action without vision is nightmare.”