Will JD.com Ever Pay A Dividend?

Growth Prospects

Source: Financial and Operational Highlights, JD.com, November 2020

JD.com has a variety of tailwinds at its back. Perhaps the largest of which is being located in China, which has exhibited strong growth trends for quite some time. The total Chinese retail market has grown by nearly 10% per year dating back to 2012. Even so, the market is much more fragmented than the U.S., with the top 20 retailers holding less than 20% of the market, compared to almost half of the market for the top 20 U.S. retailers.

Not only is China in general growing very quickly, but the online segment is increasing rapidly as well. Penetration is increasing significantly, and the size of the Chinese online retail market is become larger and larger. In 2012 the online space made up roughly 6% of the market. This year it’s approaching a fourth of the overall market.

This has allowed for significant growth at JD.com as it stands squarely in the middle of this tailwind:

Source: Financial and Operational Highlights, JD.com, November 2020

Net revenues have increased by a 34% annualized rate in the home currency during the 2015 to 2019 period. Service revenue in particular is quite impressive, but it is clear that growth has been across the board. Given that the company’s tailwinds are still very much in place, it appears JD.com’s growth runway is far from over.

Competitive Advantages

Source: Financial and Operational Highlights, JD.com, November 2020

An interesting aspect of JD.com’s market compared to the U.S. is that the potential market is much larger, but the competition is smaller. This is beneficial for two reasons.

First, as the leader in the market, JD.com stands to collect its “fair share” of growth over time. Second, and just as importantly, there is enough growth to go around, meaning that one company’s gain is not necessarily another company’s loss.

Source: Financial and Operational Highlights, JD.com, November 2020

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