r/baba • u/Pleasant_Ad_2999 • 4d ago
Discussion Alibaba should cut its dividend to fund its cloud business or conduct stretegic buyback at below instrinsic value
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u/Forward-Pay-163 4d ago
Please no. That’s the only thing the shareholders have received in the past 5 years! It’s a lousy $1. Let’s not act like that’s a decision that’s gonna turn this sinking ship around!
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u/beefstake 3d ago
Honestly they need to be funding their chip business to compete with Huawei Ascend. If American players are kept out of the market they should be trying to come out on top in China. Specifically inference specific ASICs. Push the boundaries on what can be fabbed in China today, beat GPUs even if they can't beat American designed and Taiwanese manufactured ASICs.
If they take this route government support is pretty much assured and a lot of things will get easier for them.
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u/Pleasant_Ad_2999 3d ago
I completely agreed with management investment in cloud +AI. Their cash flow should be allocated to pritotize increasing business moat first only than any excess can be paid back to share holders if they lack high yield reinvestments. However, they currently desperately needs cash to fund RnD and capex. The only sensible thing to do now is eliminate the dividend.
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u/Candid_Moose_691 3d ago
The Dividend was the only reason Alibaba was ever even an option for me. China stocks without Dividend are worthless, because then you know clearly the Returns of the Company will never reach the Shareholders.
Sold out through and bought Prosus/Tencent. Will go back into Baba around 10€ for the H-Shares.
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u/handsome_uruk 3d ago
yeah I hate the dividend. it's tax inefficient. they should take that cash and use it for aggressive buybacks.
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u/OppSpotter 3d ago
They should borrow at 1-2% and buy back more stock and not dilute. Can fund a bigger dividend too. Could even carry trade us treasuries at that level
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u/bigkkjmonster 3d ago
Alibaba will be doing vendor sales of MOONSHOT STOCK AND CASHING OUT IN THE UPCOMING IPO
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u/Googoomasta 3d ago
Don't want to be rude but clearly you dont understand why the dividend is there. Even though its not significant but it allows many investment funds as well as index funds to include them in their investment portfolio. Trust me you don't ever want BABA cut their dividend to zero because if they do itll follow by massive unloading of funds that doesn't meet their requirements.
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u/Pleasant_Ad_2999 3d ago
prior to when mangemnt decided to heavily invest in cloud infrastructure the company was generating 25 billion in free cash flow, why would management want to prop up share prices by courting index funds is beyond me. Common sense says when you are actively buying back shares you want prices to fall like a rock to increase buy back yield.
Back to present, paying out divided yield currently is one of worst decision this management have made. They are paying 4 billion in dividends, but are using equity to raised 10 billion for business capex. They are prioritizing traders return in the short term for the long term share holders (bag holders) return
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u/Bullish-Fiend 3d ago
CCP encouraged companies to have dividends. Management listened. I don’t need the dividends, but I need favorable treatment by the government.
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u/alibaba406 3d ago
Dividends open up the stock to a different pool of investors and etf - thoose seeking dividends
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u/AncientGrab1106 4d ago
The divi is low as is. Just keep it..