"I don't think Google or anyone else can make a strong argument that they need $30 billion," says Ken Smith, a portfolio manager at Munder Capital Management in Birmingham, Mich., which holds Google shares. "I'd rather have the cash in my own pocket than have all of it sitting on the balance sheet."

Google, owner of the world's most popular Web search engine, tops a list compiled by Bloomberg of large companies best positioned to pay a first-time dividend, based on such measures as sales growth and return on equity and assets. The decision to hang on to cash instead of using it to reduce the number of outstanding shares is a "drag on earnings growth," Benchmark Co. analyst Clayton Moran wrote to investors last week.

With a dividend or buyback, Google would join other U.S. technology companies that have returned cash to shareholders. The company has never declared a dividend, though it has repurchased shares. Microsoft, which had $36.8 billion in cash and short-term investments at the end of June, is in the midst of a $40 billion repurchase program that runs through 2013. The software maker, based in Redmond, Wash., started paying a dividend in 2003 and since 2008 has paid 13 cents a quarter. Cisco Systems, with a $39.1 billion cash pile, in November boosted a share buyback program by $10 billion.

No. 1 Dividend Prospect

In a Bloomberg ranking of 118 companies in the Standard & Poor's 500-stock index that have never declared a dividend, Google ranks as most well-positioned to issue one, based on metrics including sales growth and return on assets and equity. Starbucks, which appeared in the ranking earlier this year, paid its first dividend in April. Other companies near the top of the list are Celgene, First Solar, and Gilead Sciences.

Google, which first sold shares to the public in 2004, has never issued a dividend. In November, Chief Executive Officer Eric Schmidt said the Mountain View (Calif.)-based company planned to use cash to buy back shares once its all-stock purchase of AdMob Inc. was completed, to keep the deal from diluting the stock. The purchase closed in May. "We have made no decisions at all on share buybacks," Chief Financial Officer Patrick Pichette said on a conference call with analysts July 15. "It's a topic that is regularly debated, brought to the board for debate, and we have nothing to announce." Google spokeswoman Jane Penner declined to comment. (continued...)

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