Will Tesla Ever Pay A Dividend?

The appeal of growth stocks like Tesla, Inc. (TSLA) is that they have the potential for huge returns. However, they typically do not offer investors the steady income of regular dividends. For this reason, investors such as retirees—who often buy stocks primarily for dividends—have typically shied away from growth or “momentum” stocks like Tesla.

Instead, income investors usually flock to high-quality dividend growth stocks such as the Dividend Aristocrats, a group of stocks in the S&P 500 Index with 25+ consecutive years of dividend growth.

Over time, any company – even Tesla – could make the decision to start paying dividends to shareholders, if it becomes profitable enough. In recent years, investors saw this first-hand in the technology sector. It was once though inconceivable for Apple, Inc. (AAPL) to ever pay a dividend, but it initiated a dividend in 2012 after reaching a more mature business state.

However, the ability for a company to pay a dividend depends on its business model, growth prospects, and financial position. While many growth stocks have made the transition to dividend stocks, it is doubtful Tesla will join the dividend-paying ranks any time soon.

Business Overview

Tesla is an automotive manufacturer. It was founded in 2003. Since then, it has grown into the leader in electric vehicles, and it also has business operations in renewable energy. Tesla generated revenue of $11.8 billion in 2017. Today, Tesla stock has a market capitalization of $62 billion.

Tesla’s most recent quarterly earnings report showed the company made important progress towards stabilizing its financial position. The Tesla Model 3 was the #1 passenger car in the U.S. last quarter, in terms of revenue, and it was the fifth-highest selling car in terms of sales volumes.

TSLA Sales

Source: Quarterly Earnings

Tesla reached average weekly Model 3 production of roughly 4,300 units per week in the third quarter. With a focus on cost control, this allowed Tesla to generate GAAP net income of $312 million. The company had a gross margin above 20% for its Model production in the most recent quarter, which was above company guidance. Tesla also generated free cash flow—meaning operating cash flow minus capital expenditures—of $881 million for the quarter.

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Disclaimer: Sure Dividend is published as an information service. It includes opinions as to buying, selling and holding various stocks and other securities. However, the publishers of Sure ...

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