In early 2022, Block Inc (ASX: SQ2) shares made one of the most dramatic ASX debuts in recent memory.
The ASX regularly hosts its fair share of new listings and initial public offerings (IPOs). But before Block joined the ASX boards, the ASX had never welcomed what was then a US$64.77 billion ($99.22 billion at today's currency rates) company onto the stock exchange.
The dual nature of Block's stock means that we don't exactly have all of Block's size available for trading on the ASX. Even so, the company's ASX listing instantly put Block within the top 100 largest ASX shares by market capitalisation.
But unlike the vast majority of large-cap ASX stocks, Block has never paid its investors a dividend – not in the United States or on the ASX. Even if you got given Block shares in exchange for your old Afterpay stock in early 2022, you have yet to see a dime of dividend income out of this company. Not in 2022, 2023 or 2024 to date.
But could 2024 be the year this rather barren track record changes? Could Block pay investors income this year?
Is Block going to become a divided stock in 2024?
Right off the bat, let's get something straight. On the ASX, it is unusual for any profitable company to refrain from paying dividends. Our unique system of franking encourages companies to fork out dividends far more than in other countries.
Thanks to decades of this system, ASX investors have arguably come to expect dividends from their ASX shares.
But over in the United States, it is a different story. There are plenty of dividend payers of course. But in the world of US tech stocks, paying a dividend is almost unfashionable.
Tech giants like PayPal, Netflix, Amazon and Alphabet have never paid out a single dividend, despite their gargantuan cash piles and, in the latter two's case, trillion-dollar market caps.
It was only last month that Facebook-owner Meta Platforms announced its first-ever dividend. And that hasn't even been paid out yet.
But what about Block shares?
Well, a look at the company's financials should paint us a picture of this company's income potential.
Last month, Block revealed its latest earnings, covering the fourth quarter of 2023. The company revealed quarterly net revenue of US$5.77 billion, up 24% year on year.
Adjusted earnings before interest, taxes, depreciation and amortisation (EBITDA) came in at $562 million, up 100% year on year. This helped the company to report a gross profit of US$2.03 billion, up 22% from the same quarter in 2022. Block revealed that its full-year profit for 2023 was US$7.5 billion, up 15% from 2022.
However, Block also revealed an operating loss of US$131 million for the quarter.
Of course, we can't know if or when Block will pay a dividend until the moment we hear it from the company's proverbial mouth.
But I don't think it's likely. Block's finances do seem to be in rude shape, especially compared to prior years. But a company that reports an operating loss is probably not going to be in a position to fund a dividend.
For example, Meta has had billions of dollars on its balance sheet in surplus cash flow for years, and only just decided to start forking some of it out as dividends.
As such, I think Block is more likely to keep any surplus cash within the business for now. Block's ASX shareholders might be waiting a long time if they are hoping for a dividend.
