SunTrust: Don't Dismiss Google Dividend

Google Inc GOOG GOOGL investors shouldn't dismiss prospects for a dividend, an analyst said Wednesday.

Shares of the search-engine giant, down about 15 percent in the past six months amid concerns of slower growth.

But SunTrust's Bob Peck said investors should look on the bright side.

"One potential catalyst if growth is slowing: a dividend program," Peck said.

Google has $62 billion in cash and generated $3.5 billion in free cash flow in its most recent quarter. Offering a 2 percent dividend yield would cost Google $7 billion in cash distributions, according to Peck, who maintains a Buy rating on the shares.

"Investors are focused on potential negative surprises," that could be in a pending January 29 earnings report, Peck said. "But we think potential positive surprises" are getting overlooked.

Moreover, according to Peck, Google's stock price valuation ratio suggests its shares could rise 10 percent - apart from the dividend debate.

Related Link: Here's Why Google Needs To Start Paying Dividends To Its Shareholders

Peck's insight regarding a dividend isn't unique, with calls for the payment increasing as the company's share price lags.

But the investor-pundit Eric Jackson wrote recently for TheStreet that, "There's no chance that Google will pay a dividend."

Jackson, who said Google is "stuck in a golden box of its search business with no idea of what comes next," noted the company's a triple-class share structure related to voting rights.

"Grumpy shareholders can go pound sand," Jackson said.

About 34 analysts maintain Buy ratings on Google, versus 10 who maintain Hold ratings, according to FactSet Research Systems.

Recent downgrades came from Atlantic Equities and Stifel.