• Subscribe
  • Log In
  • Home
  • Daily Diary
  • Asset Class
    • U.S. Equity
    • Fixed Income
    • Global Equity
    • Commodities
    • Currencies
  • Sector
    • Basic Materials
    • Consumer Discretionary
    • Consumer Staples
    • Energy
    • Financial Services
    • Healthcare
    • Industrials
    • Real Estate
    • Technology
    • Telecom Services
    • Transportation
    • Utilities
  • Latest
    • Articles
    • Video
    • Columnist Conversations
    • Best Ideas
    • Stock of the Day
  • Street Notes
  • Authors
    • Doug Kass
    • Bruce Kamich
    • Jim Cramer
    • Jim "Rev Shark" DePorre
    • Helene Meisler
    • Jonathan Heller
    • - See All -
  • Options
  • RMPIA
  • Switch Product
    • Action Alerts PLUS
    • Quant Ratings
    • Real Money
    • Real Money Pro
    • Retirement
    • Stocks Under $10
    • TheStreet
    • Top Stocks
    • Trifecta Stocks
  1. Home
  2. / Investing
  3. / Technology

Google's Big Sympathy Move

Some are betting Google will follow Apple and offer a dividend. Can it keep up with the Joneses?
By ERIC JACKSON Mar 23, 2012 | 07:32 AM EDT
Stocks quotes in this article: GOOG, AAPL, MSFT, MMI, ORCL

In case you missed it, Google (GOOG) has made a 10% move up in the last two weeks or so. It appears to be in sympathy with Apple's (AAPL) recent dividend announcement.

The thinking on the part of investors seems to be this: If Apple finally bit the bullet and decided to return cash to shareholders, maybe Google will too, so why not buy in in anticipation of such an announcement?

But there are differences between the two big tech companies.

Apple had nearly $100 billion in cash last quarter. Next month, we'll hear it has more like $115 billion when it releases fiscal second quarter financial results -- and that will be as of the end of March.

Google had $44 billion of cash as of the end of December -- a significant hoard to be sure, but less than half Apple's stash.

There's another big difference between their abilities to pay out a cash dividend (or conduct a stock buyback): their operating cash flow levels. Apple had $45 billion in operating cash flow last year, while Google had $15 billion -- one-third as much.

It's out of operating cash flow that a company pays out a dividend. Microsoft (MSFT) has been paying out a dividend for some time. Its operating cash flow last year was $30 billion.

Google's cash and cash flow levels are certainly bigger than the vast majority of companies that pay out a dividend, so it's certainly conceivable that they could. Google, however, is playing in a much more competitive space than most other companies are.

Consider that Google is spending $12.5 billion to buy Motorola Mobility (MMI) -- and that's before the lawyers jump in and regulatory lobbying begins. That's one year's worth of their operating cash flow right there. What happens if Google commits to paying out a big dividend to keep up with Apple but then is forced to buy another Motorola-sized company to beef up its patents? Or what happens if Google is forced to pay a large settlement for patent infringement to Oracle (ORCL) for "borrowing" from Java, or to Apple on behalf of the Android ecosystem?

Of course, patent settlements might negatively affect Apple, too, but it has more of a cash cushion to protect against such an outcome compared to Google.

Apple is also a much more diversified company than Google. Ninety-six percent of Google's revenue is based on Internet index search. Its supremacy is unrivaled, but things can change. If people suddenly did all their Google searches on their mobile devices instead of their desktops, there would be a huge ding to Google's $40 billion in annual revenue.

There's also the matter of not being able to use offshore cash (or cash flow) to pay the dividend.

So, I don't rule out Google announcing a small dividend. I believe its board would be putting the company in a weakened position if they announced a large dividend just to keep up with the Joneses.

Get an email alert each time I write an article for Real Money. Click the "+Follow" next to my byline to this article.

At the time of publication, Jackson was long AAPL.

TAGS: Investing | U.S. Equity | Technology |

More from Technology

Nano Dimension's Cash Raising Could Lead to Some Intriguing Scenarios

Timothy Collins
Jan 19, 2021 12:15 PM EST

In four months, NNDM will have raised $1 billion in cash.

Cybersecurity Stocks that Lagged in 2020 Could Get Boost from SolarWinds Hack

Eric Jhonsa
Jan 16, 2021 8:00 AM EST

The hack stands to drive an uptick in corporate and government spending to protect both on-premise and cloud assets.

I Find Draganfly's Connection to American Airlines Intriguing

Timothy Collins
Jan 15, 2021 12:29 PM EST

Drones are set to become a bigger and bigger part of the commercial world and our day-to-day lives.

Twitter Shares Are Just Plain Overvalued

Jim Collins
Jan 15, 2021 11:45 AM EST

Here's where Jack Dorsey's ship will start to sink.

World's Third-Largest Smartphone Maker Added to U.S. Military Blacklist

Alex Frew McMillan
Jan 15, 2021 8:30 AM EST

Xiaomi shares plunged in Hong Kong trade Friday after the Department of Defense said the mobile-phone maker is part of China's 'military-civil fusion'.

Real Money's message boards are strictly for the open exchange of investment ideas among registered users. Any discussions or subjects off that topic or that do not promote this goal will be removed at the discretion of the site's moderators. Abusive, insensitive or threatening comments will not be tolerated and will be deleted. Thank you for your cooperation. If you have questions, please contact us here.

Email

CANCEL
SUBMIT

Email sent

Thank you, your email to has been sent successfully.

DONE

Oops!

We're sorry. There was a problem trying to send your email to .
Please contact customer support to let us know.

DONE

Please Join or Log In to Email Our Authors.

Email Real Money's Wall Street Pros for further analysis and insight

Already a Subscriber? Login

Columnist Conversation

  • 11:09 AM EST GARY BERMAN

    Is Copper About to Turn to Rust?

    Below is a very long-term copper chart.  As you...
  • 08:02 AM EST GARY BERMAN

    Tuesday Morning Fibocall for for 1/19/2021

    SPX (Long-Term View) The 1/8/21 high @ 3826.69 i...
  • 09:01 AM EST JAMES "REV SHARK" DEPORRE

    This Weekend on Real Money

    When it's time to sell, will you act or freeze?
  • See More

COLUMNIST TWEETS

  • A Twitter List by realmoney
About Privacy Terms of Use

© 1996-2021 TheStreet, Inc., 225 Liberty Street, 27th Floor, New York, NY 10281

Need Help? Contact Customer Service

Except as otherwise indicated, quotes are delayed. Quotes delayed at least 20 minutes for all exchanges. Market Data & Company fundamental data provided by FactSet. Earnings and ratings provided by Zacks. Mutual fund data provided by Valueline. ETF data provided by Lipper. Powered and implemented by FactSet Digital Solutions Group.

TheStreet Ratings updates stock ratings daily. However, if no rating change occurs, the data on this page does not update. The data does update after 90 days if no rating change occurs within that time period.

FactSet calculates the Market Cap for the basic symbol to include common shares only. Year-to-date mutual fund returns are calculated on a monthly basis by Value Line and posted mid-month.

Compare Brokers

Please Join or Log In to manage and receive alerts.

Follow Real Money's Wall Street Pros to receive real-time investing alerts

Already a Subscriber? Login