Will NIO Limited Ever Pay A Dividend?

NIO Limited (NIO), the Chinese manufacturer of electric vehicles, has undoubtedly attracted the focus of investors this year. Despite the impact of the pandemic on the automotive industry, NIO stock has rallied more than 1200% this year, from $3.72 to $49 a share. The impressive rally has resulted from the enthusiasm of investors about the growth potential of the company, which is in the very early stages of a multi-year growth trajectory.

The huge increase in NIO’s share price has lifted its market capitalization to over $70 billion. It is now a large-cap stock, many of which pay dividends to shareholders.

Income investors may have missed NIO’s 2020 rally, as the company does not pay a dividend. The absence of a dividend is fairly common among growth stocks, particularly in the early phases of their growth.

Income investors who are attracted by the impressive return potential of NIO probably wonder whether the company will pay a dividend anytime soon. This article will examine NIO’s business model, growth prospects, and competitive advantages in an attempt to answer that question.

Business Overview

NIO manufactures and sells electric vehicles in China, Hong Kong, the U.S., the U.K., and Germany. It is also involved in energy and service packages, such as battery packs and components.

The cost of production of electric vehicles has significantly decreased in recent years. In addition, manufacturers have managed to greatly improve the autonomy of these vehicles thanks to technological improvements in batteries. As a result, the electric vehicle business has become a high-growth industry.

NIO benefits not only from the high growth rate of the electric vehicles but also from the immense growth potential of the Chinese market. The Chinese economy has grown by more than 6% per year for more than a decade. In addition, it has recovered strongly from the pandemic thanks to its drastic measures which contained the pandemic much more efficiently than many other countries that are still struggling against the pandemic. Moreover, NIO is in the very early phases of the expansion of its business.

In the third quarter, NIO delivered 12,206 vehicles and thus grew the number of vehicles sold by 154% over the prior year’s quarter and by 18.1% over the previous quarter. Its ES6 model has been the fastest-selling electric SUV in China for 13 consecutive months.

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Disclosure: Sure Dividend is published as an information service. It includes opinions as to buying, selling and holding various stocks and other securities.

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