Off-Grid Income: Google is paying a dividend
Should you buy Google? The company just made history with a $2 trillion dollar market cap
Hello Off-Grid Income family!
Let’s get right into the subject at hand… Google is finally paying dividends!
For a while, I've been curious about when this mega tech company would start distributing cash to its shareholders. Finally, that day has arrived.
The burning question is: why now?
Let’s delve into their recent performance and revenue updates to uncover more.
**Disclaimer**
I hold shares of Alphabet (Google) in my investment portfolio.
Please note, this content is for informational purposes only and not intended as investment advice. Always conduct your own research and consult with a licensed financial advisor before making any changes to your investment strategy.
Google the facts
Although Alphabet saw a dip in earnings in the first quarter of 2023, its stock price has since made a remarkable recovery, showing robust growth and signaling potential for reaching new heights.
Alphabet has effectively prioritized its cloud business(Google Cloud Platform), which witnessed a 28% year-on-year growth.
Their market capitalization remains impressively solid at over $2.15 trillion, and it shows no signs of diminishing anytime soon.
Revenue projections suggest a 7% growth by 2028, potentially reaching over $500 billion, compared to its current level of $307 billion.
YouTube’s advertising sales alone surged by 21% in Q1, contributing approximately $8 billion to date.
Additionally, they are issuing their very first cash dividend to shareholders, which significantly boosted the overnight trading markets yesterday.
The testing of Gemini, their latest AI model, has led to increased usage. This begins to answer the question of when we might see sales growth directly resulting from AI initiatives.
They have also decided to deploy capital for share buybacks. Such a move not only enhances the value of the shares held but also signals the company’s belief that their stock is undervalued and has room to grow in the mid to long term.
These strategic moves reinforce their commitment to returning value to shareholders over time, a challenging feat when balancing significant investments in infrastructure to scale their cloud business.
For a long time, Google was perceived as not being investor-friendly. That perception has now completely changed.
Insider Talk…
Since Google is known for not providing firm guidance, it was refreshing to hear their CFO, Ruth Porat, offer insights during a recent call.
Ruth stated, “We are excited about what generative AI can add to the user experience, and based on our testing, we are encouraged by the increase in search usage we are seeing.”
In my humble opinion
Personally, I appreciate what they’re doing with search. I enjoy having the answer to the question I searched for appear right at the top of my screen and i don’t have to search through multiple sources.
SGE, or search generative experience is a great feature that Google incorporated into their search business, not as my final decision on a matter.
While incorporating generative AI into their search operations seems promising, it's still unclear how it will benefit ad revenue in future quarters.
Things that make you go hmm
What’s intriguing is that despite major investments in AI and the launch of new AI products like Gemini, Google managed to expand their operating margins. Why is this important?
Operating margins measure how much a company earns from its core operations, which for Alphabet includes:
Software (Android OS)
Advertising (video ads, search-based ad placements, etc.)
Cloud Storage (Google Cloud Platform)
Hardware (Chromebooks, Pixel, Nest, etc.)
Miscellaneous ventures (Waymo, Verily, Google Fiber)
Currently, Alphabet is buzzing with positive activity. They’ve fine-tuned their strategy by securing more resources for growth, aggressively hiring in the AI sector, and maintaining a strong presence in ad-tech.
As usual, we should maintain a healthy skepticism about whether this strong performance and investor-friendly posture will persist.
Despite their need to scale back in key areas, I’ll keep an eye on:
Capital allocation
Expense management
Resource acquisition
My goal is to see if their recent initiatives will lead to significant benefits for us all.
Until next time,
Off-Grid Income