Dividends and High expenses weigh on Alphabet’s profits

In late October, Alphabet the parent company of Google reported its quarters and it was a good quarter but some concerns remain. The company is the world’s dominant provider of internet search, advertising, and video services. The company has increased spending on cloud services and consumer electronics and believes it needs to be in these markets to maintain industry leadership.

In an article by Munsif Vengattil and Paresh Dave of Reuters, Alphabet provides limited product level financial disclosures which allows investors to have questions how the company is doing regarding regulatory scrutiny, global trade tensions and advertiser boycotts. The uncertainty has met Alphabet shares are up 17% in the past year but Microsoft was up 33% and Facebook 29%. If you owned the shares those are all good numbers.

In the 3rd quarter, Google expenses were $31.3 billion or 25% more than the previous year. In 2018 expenses were $31.1 billion. Revenues increased to $40.5 billion

Linking to dividend paying stocks, while expenses were up so are revenues but for any company unless there is great reason when expenses go up 25% people have a concern, and some belt tightening is needed. The reality of every company which operates is expenses have to be lower than revenues. If you get that on a consistent basis, profits are made and dividends paid.

There are more questions than answers, till the next time – to raising questions.

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