Google has more than $100 billion in cash. It’s time to pay a dividend
Google owner Alphabet ended last year with more than $109 billion in cash.
But when Alphabet released its latest results after the closing bell Monday, investors didn’t hear about plans to use any of that cash to pay a dividend.
That may be holding back the stock.
Alphabet is still growing rapidly. It reported that revenues rose 22% in the fourth quarter.
Analysts also expect earnings growth of about 13% for 2019 and a sales increase of 20%. But the stock has still lagged many other big tech companies over the past year. Offering a dividend could be a way to reward patient investors with more cash.
Shares of Alphabet are flat during the past 12 months while Apple and Microsoft — which do pay a dividend — are up 5% and 13% respectively. Alphabet has also underperformed when compared to more rapidly growing fellow FAANG stocks Amazon and Netflix, which don’t pay dividends.
Alphabet was not immediately available for comment for this story. But the company has repeatedly told investors they should not expect a dividend anytime soon.
The company said in its 2017 annual filing with the Securities and Exchange Commission that “we intend to retain any future earnings and do not expect to pay any cash dividends in the foreseeable future.”
Still, tech companies can pay dividends and use some of their giant piles of cash for investments.
Apple’s stock stumbled lately because of concerns about slowing iPhone sales. But shares have more than doubled since the company began paying a dividend in March 2012. That’s better than the S&P 500’s gains during the same period.
Microsoft has been reinvigorated over the past few years thanks to the cloud-focused strategy of CEO Satya Nadella. Shares are just 10% from the all-time high they hit last year.
Cisco and Oracle pay dividends and their stocks have outperformed the broader market over the past year.
So it might be time for Alphabet to give some of its nine-figure cash hoard back to investors.
The company could pay a dividend and still have plenty of money left over to keep buying back stock, invest in research and development and make acquisitions. Just ask Microsoft and Apple.