It’s not just growth in cash flow that matters; we also have to take into consideration free cash flow. Google managed to generate $2.7 billion of core free cash flow. Keeping this figure in mind, Apple has managed a payout ratio of 26.5%, Microsoft has managed 31.6% and Facebook still hasn’t paid dividends, just like Google.
Google should be able to maintain an average payout ratio of 28% when compared to the figures of Apple and Microsoft. With $2.7 billion in cash flow, an estimated $786 million would be available as dividends in a quarter. Keeping in mind that Google Inc (NASDAQ:GOOG) has 300.4 million shares outstanding, the company would be able to afford $9.50 as an annual dividend. As of now, the stock is trading higher than $815, which would mean a 1.1% yield.
Though Apple as of now has lifted its dividend, the company did keep its investors happy for a pretty long time. Apple might be saving up for an acquisition to get back in the game, but for Google things are the other way round. Google still has a lot of work to be done on its recent acquisitions, such as Motorola Mobility .
Google Inc (NASDAQ:GOOG) has $48 billion in net cash, a hefty amount for any company. Though the company is growing, it doesn’t seem to be retiring shares. Paying investors would help the company to maintain its “alpha” company status. Let’s face it Google, it’s about time now.
The article Will Google Reward Investors Soon? originally appeared on Fool.com and is written by Ashley Sales.
Ashley Sales has no position in any stocks mentioned. The Motley Fool recommends Apple, Facebook, and Google. The Motley Fool owns shares of Apple, Facebook, and Google. Ashley is a member of The Motley Fool Blog Network — entries represent the personal opinion of the blogger and are not formally edited.
Copyright © 1995 – 2013 The Motley Fool, LLC. All rights reserved. The Motley Fool has a disclosure policy.