Dividend investing is expected to gain popularity now, as yields on fixed income have plummeted this year. Retirees and investors who rely on regular income from their investments might find solace in stocks that pay good dividends. Tesla stock has risen significantly since its IPO a decade back. But does Tesla pay dividends?
Tesla’s dividend yield
The short answer on whether Tesla pays dividends is "no." Tesla does not currently pay a dividend. Also, investors shouldn't expect Tesla to pay dividends anytime soon. On its website, the company states, “Tesla has never declared dividends on our common stock. We intend on retaining all future earnings to finance future growth and therefore, do not anticipate paying any cash dividends in the foreseeable future.” And since Tesla doesn't pay dividends, it doesn't have a dividend yield.
You may now be asking why Tesla doesn't pay dividends, and whether its dividend policy differs from that of peer companies. A lot of investors compare Tesla with Apple and Amazon, arguing that Tesla is a tech company and not an automotive company. We’ll leave the discussion about Tesla’s business model for some other day, but for now, let's look at dividend policies for Tesla, Amazon, and Apple.
Apple stock: Would you invest for dividends?
Apple went public in 1980 and started paying dividends seven years later. It continued paying dividends until 1996, stopped, and then resumed in 2012. Since then, the company has been paying dividends every year. That said, Apple isn't a “dividend stock” in a true sense, with its forward dividend yield of 0.85 percent not even half of the S&P 500’s yield.
Time to break up Amazon. Monopolies are wrong!— Elon Musk (@elonmusk) June 4, 2020
Amazon doesn’t pay dividends. The company went public in 1997 and has delivered astonishing returns since the IPO. However, while the company sporadically repurchases its shares, the first preference for the Jeff Bezos-led company has been to invest in growth. Bezos and Tesla CEO Elon Musk aren’t the best of pals, and in June, Musk tweeted that Amazon should be broken up, echoing calls from several lawmakers. That said, Musk and Bezos have a lot of similarities. Many believe that Tesla might eventually “Amazon” legacy automakers.
Will Tesla ever pay a dividend?
Meanwhile, if you're an investor in a high-growth company like Tesla, you shouldn’t be craving dividends. In some ways, initiating dividends may signal that growth rates are plateauing. Last year, eBay started paying dividends after being listed for 21 years, a move The Sunday Times described as “an admission of defeat—a sign that you’ve run out of ideas.”
As for Tesla, the company is in a high-growth phase, with new factories going up in Germany and the U.S., and another plant rumored for Asia. In February, it issued shares to raise capital for its growth projects. Considering Tesla’s business plans, investors shouldn’t expect dividends for a while. Meanwhile, if you're interested in dividend investing, you may want to learn more about dividend taxation in the U.S.