Is a Google Dividend Even Possible?

Published on March 21, 2012
by John Paczkowski

Now that Apple has broken with tradition and issued a dividend, who among the non-dividend-paying tech firms will follow suit?

Impossible to say, though the company that’s likely at the top of the short list is Google.

With $44.63 billion in cash and cash equivalents on its balance sheet as of Dec. 31, the search behemoth is the most cash-rich tech company among the big dividend holdouts. In fact, it’s now the only tech company with a market cap above $100 billion that doesn’t offer a dividend.

And while Google hasn’t even hinted at offering a dividend anytime soon, some analysts believe the company is the most likely among its peers to consider one.

“We found that Google has the greatest capacity to return cash,” said Barclays analyst Anthony DiClemente.


“It probably has the most to gain in terms of positive sentiment by doing so, given its propensity for acquisitions and mixed investor sentiment around the Motorola Mobility deal.”

That’s certainly true. But there’s a problem with that view: Google is about to spend $12.5 billion of its cash stash on that Motorola Mobility deal. Now, Motorola Mobility had about $3.5 billion in its own coffers as of December 2011, with an estimated $3.2 billion of it on shore, but it’s unclear whether Google will combine the balance sheets of the two companies. Remember, the deal has yet to be consummated.

And then there’s that $4 billion in debt Google is carrying.

And a host of potentially expensive patent-related actions orbiting Android.

Add to that the fact that a big chunk of Google’s cash is held in overseas accounts and can’t be brought home without a massive tax hit and the company seems a far less likely dividend candidate that it does at first glance.

“With the completion of the Motorola Mobility deal, Google would have only around $3.5 billion in net U.S. cash/investments,” said S&P Capital IQ analyst Scott Kessler. “We think CEO Larry Page has reasons to practically and philosophically favor other uses of capital, and do not see a dividend anytime soon.”

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