The online accounting software company Xero Limited has long been a market darling here on the ASX boards. Xero shares have risen from under USD 20 five years ago to USD 115.18
FREMONT, CA: Xero shares have lost around 11.8 percent in the last 12 months, including the 21.5 percent they have lost so far in 2022. Still, during the last five years, Xero has been one of the best-growing companies to purchase on the ASX, earning it a position in the once-famous WAAAX group. Xero's stock price has risen as a result of the company's impressive growth metrics. Xero released its half-year results for the six months ended September 30, 2021, just two months ago. The corporation claimed a 23 percent rise in revenue and subscribers, with an 87.1 percent gross margin.
With numbers like these, it's natural to wonder why Xero doesn't pay a dividend to its long-term shareholders. Dividends are a typical occurrence on the ASX boards, as most investors are aware. Shares on the ASX that do not pay a dividend are quite uncommon. Xero, for example, is a well-known ASX 200 name.
In November, the company reported NZD 981 million in earnings before interest, taxes, depreciation, and amortisation (EBITDA). When compared to the same half of the previous year, this was a 19 percent decrease. Xero, on the other hand, posted a net loss of NZD 5.9 million for the quarter. This suggests that Zero is still in its 'growth phase,' and that it is continuing to reinvest its profits in the company to fuel future growth. As a result, it's possible that Xero's management believes that reinvesting its cash in the firm rather than paying a dividend is a better investment.
So, based on the data above, Xero may be able to pay a dividend to its shareholders. After all, it did post positive earnings. However, that does not appear to be the company's primary focus. If Xero's revenues and subscribers expand at least as fast as they did in November over the next few years, a dividend is a distinct possibility. However, it appears that management's priorities are elsewhere for the time being. The market capitalization of Xero is USD17.2 billion at the current share price.
