Does Google Pay Dividends? – Dividend Power

Are you thinking of investing in GOOG or GOOGL stock this year? Well, you won’t be the only one. Having generated over 300 billion in revenue last year with, according to the same source, a profit margin of 25%+, there’s no shortage of incentive to do so. But does Google pay dividends as well?

That’s the question on many aspiring investors’ minds, not to mention a point of contention among existing shareholders. In this article, we’ll explore the topic and outline the reasons behind Google’s current dividend policy.

Does Google Pay Dividends?

In a word, yes. Google or, to be more accurate, Alphabet- their parent company changed its policy in April of 2024. This announcement changed a long-standing policy directing cash to other requirements.

Alphabet’s board authorized a $0.20 per share per quarter payment to stockholders of the company’s Class A, B, and C shares. The firm intends to pay quarterly dividends in the future. However, it is not clear if the amount will be increased annually. The two largest shareholders are co-founders Sergey Brin, with 730 million Class B and C shares, and Larry Page, with 389 million Class B shares. They will each receive tens of millions of dollars each quarter.

Why Does Google Now Pay Dividends?

Google arguably changed its policy to align with its tech competitors. Apple and Microsoft have a long history of paying dividends. Both companies increase their dividends annually. Apple and Microsoft are dividend growth stocks, and we expect them to continue with their dividend increase announcements. Meta Platforms also announced its first dividend distribution in February 2024.

That said, the dividend yield is still minuscule at approximately 0.1% to 0.2% and the payout ratio is meager at less than 3%.

Why Google Didn’t Pay Dividends Before The Policy Change?

That’s a good question. After all, why would a company with a market cap above $2.2 trillion refuse to pay dividends- especially when other businesses of a similar size, such as Apple and Microsoft, did?  In fact, the dividend policy in their 2017 annual filing with the SEC explicitly stated,

We intend to retain any future earnings and do not expect to pay any cash dividends in the foreseeable future.

In this section, we’ll detail the key factors that prevented Google from paying a dividend before the policy change..

Research and Development

Google is a unique company in the tech space because it has a proverbial finger in many different pies. With over 3.5 billion searches per day, it’s undoubtedly the biggest search engine on the internet. But it also sells smartphones, tablets, smart home products via Google Nest, software, and other tech products.

Google’s innovative spirit is evident in its ambitious projects that push the boundaries of technology. From driverless cars under its sister company, Waymo, to carbon capture with 280 Earth, and a futuristic drone delivery service called Google Wing, the company’s commitment to growth and expansion is unwavering.

As you can imagine, these forward-thinking projects don’t fund themselves. By withholding dividend payments from shareholders, Alphabet freed up capital to invest in ongoing research and development. Indeed, the company spent a staggering $43.79 billion on R&D last year- up from $7.14 billion in 2013. Only Amazon (AMZN) spends more than that on R&D per annum.

Mergers and Acquisitions

R&D isn’t the only reason Alphabet’s cash holdings come in handy. They fund company acquisitions as well, and the scale of these acquisitions is truly impressive. Google’s parent company spent billions over the past few years to acquire companies like Fitbit Inc. (FIT) for $2.1 billion, cybersecurity firm Mandiant Inc. (MNDT) in an all-cash transaction worth almost $5.4 billion, Raxium, Looker, and others. 

This rate of acquisition is a symptom of Google’s competitiveness and commitment to innovation in the tech world. Despite the scale of its current empire, the company must maintain pace with its competitors. Alphabet is a growth company through and through. Every cent it withholds from investors is additional capital it can reinvest to spur future growth.

Share Buybacks

Does Google pay dividends? Yes, but historically, it has focused on enormous share buybacks that let investors sell their shares back to the company. In addition to the quarterly dividend payment, Alphabet authorized a $70 billion share buyback program in April 2024, after a similar-sized one in 2022, a $50 billion share buyback in April 2021, and the board’s authorization of a $25 billion share buyback program in 2019. Some pundits have argued this is more lucrative for investors in the long run. However, this is short sighted as dividend and stock buybacks can each benefit shareholders.

After all, not only do repurchase programs elevate the value of Alphabet’s remaining shares, boosting investor ROI much faster, but they also tell the market that the company believes its stock is currently underpriced. Ultimately, a surge of demand ensues, pushing the value of your portfolio up with it.

Time to Buy GOOG and/or GOOGL Stock?

Since its inception in 1998, Google has grown into a household name and one of the largest companies on the planet. It’s little wonder that so many investors seek to transition from Google customers to Google owners. Before taking the plunge and purchasing Alphabet’s GOOG or GOOGL stock, though, many understandably wonder, “Does Google pay dividends?”

If that’s been the question on your mind, then we hope the insights in this article have been helpful. After many years, Google, or more precisely, Alphabet, changed its dividend policy and now pays one quarterly. As one of the most innovative and fastest-growing firms, you will likely enjoy a sizable return on investment over time. To learn more about similar topics and take your portfolio to the next level, check out our Dividend Investing Resources page.

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Prakash Kolli is the founder of the Dividend Power site. He is a self-taught investor, analyst, and writer on dividend growth stocks and financial independence. His writings can be found on Seeking Alpha, InvestorPlace, Business Insider, Nasdaq, TalkMarkets, ValueWalk, The Money Show, Forbes, Yahoo Finance, and leading financial sites. In addition, he is part of the Portfolio Insight and Sure Dividend teams. He was recently in the top 1.0% and 100 (73 out of over 13,450) financial bloggers, as tracked by TipRanks (an independent analyst tracking site) for his articles on Seeking Alpha.