Will JD.com Ever Pay A Dividend?

JD.com also has an immense nationwide network that serves as a lasting competitive advantage. It would be very difficult for an upstart to match the scale and reach of JD.com. This advantage provides three noticeable benefits: 1) keeping would-be competitors at bay, 2) allowing for an improved cost structure through scale, and 3) keeping the customer happy with quick and dependable service.

As of the most recent report, JD.com held $10.8 billion in cash, $30.6 billion in current assets, and $55.1 billion in total assets against $25.4 billion in current liabilities and $29.3 billion in total liabilities. Long-term borrowings were under $500 million which is quite impressive for such a large company that is growing as fast as it is.

Will JD.com Ever Pay A Dividend?

Any successful business works through different phases of needing and allocating capital. In the beginning, companies are usually capital-intensive, requiring significant funds. Equity is issued and debt is sought, while cash flows have not yet materialized.

In the growth phase profitability is possible, but the focus is often on reinvestment instead. This usually means reinvesting all cash flows and continuing to seek more capital via debt or equity.

Once a company begins to mature, the cycle starts to unwind itself. Debt and equity can still be used, but often the profits being generated are more than enough to service, sustain, and even grow (albeit at a slower rate) the now much larger business. Further, debt is reduced to a manageable level and a company may begin repurchasing shares. Finally, a dividend may be considered, indicating that the company is sustainable and generating excess funds.

When thinking about JD.com in that framework, JD.com is still very much in the growth phase. The revenue growth rate of JD.com has been fantastic – growing from $27 billion in 2015 to an expectation of over $100 billion this year – but that has not yet translated into terrific bottom-line results. JD.com lost money in 2015, 2016, and 2018 and barely broke even in 2017. Last year the company did post $1.18 in earnings-per-ADS and this year the number is already above $2 per ADS. However, a consistency in results has not yet been established.

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