Now that Apple has finally caved in to the demands of some of its investors and announced a dividend and share repurchase policy, many analysts are expecting Google to follow suit. Google is one of the few other tech companies which has massive cash reserves, but hasn’t issued a dividend yet.
Google had close to $45 billion in cash and cash equivalents as of December 31, 2011. It may also be the right time for it to dole out some dividends, if only for the positive sentiment associated with it – Apple’s stock rose after it announced the dividend.
However, Google may not be in as good a position as Apple to pay out dividends even if it wanted to. Here’s why:
1. Like Apple, most of its cash is trapped overseas. So, Google can’t bring it back without a huge tax bill which would eat into a significant portion of it.
2. It has yet to pay out $12.5 billion for Motorola.
3. It is currently involved in a lot of litigation related to Android, which may lead to substantial payouts.
An analyst stated that after accounting for all these factors, Google would probably have only about $3.5 billion left in net U.S. cash reserves, which is why it cannot really pay out a dividend right now.