Will Salesforce Ever Pay A Dividend?

As of the most recent report, Salesforce held $4.1 billion in cash, $5.2 billion in marketable securities, $14.8 billion in current assets, and $57.8 billion in total assets against $13.0 billion in current liabilities and $19.3 billion in total liabilities. Long-term debt stood at just $2.7 billion.

It’s important to note that $26.3 billion of the company’s total assets are comprised of goodwill. This results in a slightly less impressive financial stance, but it also captures the idea that Salesforce is growing both organically and through acquisitions. Keeping a sound financial footing and being able to acquire companies will continue to be important as Salesforce matures.

Will Salesforce Ever Pay A Dividend?

Speaking of maturing, the question as to whether or not Salesforce will pay a dividend can be thought about along a “maturity scale.” Any successful business works through different phases of needing and allocating capital. In the beginning, companies are usually capital-intensive, requiring significant funds for growth investment. Equity and debt are issued to raise funds, 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 is considered, indicating that the company is sustainable and generating excess funds.

When we think about those three stages, Salesforce is still very much in the growth phase.

While the history of revenue growth detailed above is exceptional, the bottom line does not tell the same story. In the 2012 through 2016 period, Salesforce posted a loss each year. In the 2017 through 2020 period, earnings-per-share totaled $0.26, $0.17, $1.44 and $0.15. And while earnings-per-share are expected to top $3+ this year, a trend has not yet developed.

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Harry Goldstein 3 months ago Member's comment

I've often wondered about this myself.