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Does Google pay dividends?

Well firstly, Google actually now trades under its parent company Alphabet Inc. (ticker symbol GOOGL).

As most people would know google is a company that operates transnationally and is know as a major source of cash flow.

It is common for companies of this size and market capitalization to pay a dividend to their investors.

However, Alphabet has never done so – making their dividend yield 0%.

Some investors say that their generous share buyback scheme is similar to that of a dividend. This is heavily criticized by many.

Why Does Google Not Pay A Dividend?

Google (Alphabet) is known as a growth company and as such the board trusts that shareholders will benefit markedly more from earnings being retained and used by the company to grow further.

Due to their ability to innovate, Google is an exciting stock for investors to trade in and out of as they have many ground-breaking projects underway.

One such project being that of driverless cars, which are set to be the next major consumer electronics product.

Whilst Alphabet has yet to officially announce its long-term plans regarding their business direction, it is likely that partnerships with well-known car brands will be a future prospect.

The thought of this has excited investors due to the enormous possible returns if the projects have a successful outcome.

Other areas of investment include smart contact lenses and balloons with internet connectivity that fly at high altitudes.

Another reason that the Google dividend is zero is because they need as much cash possible for acquisitions.

Since going public, Google has purchased over 150 companies, the largest being Motorola in 2011.

There are rumors that Google is looking to acquire large entertainment firms from the likes of Netflix to Twitter.

Since Google prefers to use cash to make acquisitions rather than using debt it is an attractive option for investors.

A distinction should be made between why google doesn’t pay a dividend and if they should pay a dividend.

For a company to pay one they must consider a few things. One such thing would be their revenue stream; specifically, how predictable it can be.

Over the past 5 years, Google's earning capacity has doubled which theoretically informs investors and the board that they would be able to afford to pay a dividend.

Another factor that must be considered is the financial strength of the company.

Seeing as Google has over $80 billion in cash and very little debt, they would be able to pay a dividend from their cash balance alone.

Even though no money has been paid by way of dividends, money is still returned to investors through share buybacks.

Currently, there is a $7 billion share repurchase program in place.

There are a few benefits to share repurchase plans over dividends, it allows the remaining shares of the company to be worth more – meaning the investor's return on investment grows more rapidly.

Repurchases also alert to the market that they believe the stock is undervalued and the best use of capital is to buy out the shareholders in the long term.

How Much Could Google Afford To Pay In A Dividend If They Did?

According to the most recent reports, Google earned just over $9 per share. Using a payout ratio of 7%, this would represent a rough dividend payment per share of $0.65 and a dividend yield of 0.07%.

Having a dividend at 15% would not impact greatly on Google's financial position. This would equate to a dividend of $1.40 per share.

Google could go higher or lower than these examples, however, it is all speculation until official figures are announced, if a dividend is deemed a good idea by the board.