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Netflix (NASDAQ:NFLX) has never paid a dividend. Its latest annual report says so, adding that the company doesn't currently expect to pay one in the foreseeable future.
But the business behind that policy has changed a lot. Netflix's free cash flow (the cash its operations bring in, minus spending on property and equipment) grew from $6.9 billion in 2024 to $9.5 billion in 2025. Management expects about $12 billion this year.
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Meanwhile, the stock has dropped hard. Shares trade around $64 as of this writing, about 45% under their 52-week high of $116.73.
On paper, the money's there. With around 4.1 billion shares outstanding, Netflix is worth about $263 billion at today's price. A dividend yielding 1% would cost around $2.6 billion a year -- a bit over a fifth of the free cash flow Netflix expects this year.
Granted, this year's number is getting help from a one-off item. Netflix took in a $2.8 billion termination fee in the first quarter after it declined to raise its bid for Warner Bros.
Management said the fee's after-tax effect was the main reason it upped its 2026 forecast from $11 billion to $12.5 billion. (It's since lowered that to around $12 billion, mostly because of a real estate deal.)
But even the earlier $11 billion would cover a payout that size about four times over. And the underlying cash flow is still climbing. The streaming service's third-quarter free cash flow grew around 8% year over year to $2.9 billion.
The catch is Netflix has already chosen where its spare cash goes. In its third-quarter shareholder letter, management repeated the order it has laid out all year. Netflix reinvests in the business first, keeps a solid balance sheet and plenty of liquidity, and then returns extra cash through share repurchases.
Dividends aren't part of it, and I think the list says more about Netflix's dividend odds than its cash flow does.
What's more, repurchases have recently been taking more than all the spare cash. Netflix spent more than $10.7 billion on buybacks through the end of September, versus $9.5 billion of free cash flow in the same nine months -- a number that included the termination fee.
The pace has picked up all year. Netflix bought back $1.3 billion of shares in the first quarter, then around $4.7 billion and $4.8 billion in the next two.
The difference came out of the company's cash. Netflix held $12.3 billion of cash and cash equivalents at the end of March. By the end of September, it had fallen to $8.2 billion.
Gross debt, meanwhile, climbed around $1 billion in the third quarter to $15.3 billion, after a bond sale meant to cover a $1 billion maturity due in the fourth quarter. This leaves Netflix with around $7.1 billion more debt than cash.
Content has a claim on the cash, too. Netflix's latest quarterly filing shows $25.2 billion in content obligations, with around $11.8 billion due within the next 12 months.
When social media company Meta Platforms (NASDAQ:META) declared its first dividend in February 2024, it did so in a far stronger position. Meta finished 2023 with $65.4 billion in cash, cash equivalents, and marketable securities versus $18.4 billion of long-term debt. And its $43 billion in free cash flow that year was more than twice the $20 billion it spent on buybacks.
Even aside from the balance sheet, I don't think a dividend is the better use of Netflix's money today. Netflix paid around $75 a share, on average, for the stock it bought back from July through September. With shares near $64, each buyback dollar now retires about 17% more stock.
After all, a buyback keeps the choice with shareholders. Those who want cash can sell a few shares, while everyone who holds on ends up owning a bigger part of the business. A dividend, though, can be tough to cut after it starts.
Is a Netflix dividend likely in the next few years? I don't think so. The company could probably afford a small one, but its buybacks are already outpacing its free cash flow, and its own annual report says no payout is planned.
Before that changes, I'd expect Netflix to let its cash build back up and its buybacks settle below what the business brings in. That doesn't look close.
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Will Netflix Ever Pay a Dividend? was originally published by The Motley Fool
