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Buy Alphabet Now Before Everyone Else Does

Jan. 05, 2022 8:26 AM ETAlphabet Inc. (GOOG), GOOGL189 Comments


  • One of the strongest bull markets in history has been driven by mega-cap tech, which as a group is 67% historically overvalued.
  • But it's always and forever a market of stocks, not a stock market and even hyper-growth blue-chips are still reasonably to attractively valued if you know where to look.
  • Even after a 67% rally in 2021, GOOG remains a classic Buffett-style "wonderful company at a fair price". One that offers 19% long-term return potential.
  • No matter what happens in 2022, the world's best blue-chips stand ready to help you achieve your long-term financial goals.
  • When you focus on safety and quality first, and prudent valuation and sound risk management always, a comfortable or even rich retirement isn't a matter of luck, just time and patience.
  • This idea was discussed in more depth with members of my private investing community, The Dividend Kings. Learn More »


400tmax/iStock Unreleased via Getty Images

Growth stocks have been the main drivers of the incredible bull market we've seen since 2009.

Average annual returns SP 500(Source: Michael Batnick)

And 2021 has been no different.


In fact, 35% of this year's 30% gains are purely from five


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This article was written by

Dividend Sensei profile picture

Dividend Sensei (Adam Galas) is an Army veteran and stock analyst with 20+ years of market experience.

He is a founding author of the investing group The Dividend Kings which focuses on helping investors safeguard and grow their money in all market conditions through the highest-quality dividend investments. Dividend Sensei and the team of analysts (Brad Thomas, Justin Law, Nicholas Ward, Chuck Carnevale, and Sebastian Wolf) help members invest more intelligently in dividend stocks. Features include: 13 model portfolios, buy ideas, company research reports, and a thriving chat community for readers looking to learn how to invest more intelligently in dividend stocks. Learn more.

Analyst’s Disclosure: I/we have a beneficial long position in the shares of GOOG, GOOGL either through stock ownership, options, or other derivatives. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

Dividend Kings own GOOG, and GOOGL in our portfolios.

Seeking Alpha's Disclosure: Past performance is no guarantee of future results. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. Any views or opinions expressed above may not reflect those of Seeking Alpha as a whole. Seeking Alpha is not a licensed securities dealer, broker or US investment adviser or investment bank. Our analysts are third party authors that include both professional investors and individual investors who may not be licensed or certified by any institute or regulatory body.

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Comments (189)

Dividend Sensei profile picture
I’d like to sincerely thank all my 87,000 followers for an incredible five years at Seeking Alpha. It’s been a privilege and honor to help teach so many people how to take charge of your financial destiny and achieve your long-term financial goals.

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2022 is sure to be an exciting and profitable year for anyone who remembers to focus on safety and quality first, and reasonable valuation and prudent risk management always.

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Adam Galas

Senior Analyst, Dividend Kings
jillydavid profile picture
@Dividend Sensei huge fan of your work. Thanks for all that you do.
@Dividend Sensei. Always appreciate your detailed and substantiated advice. Some of the best on Seeking Alpha or anywhere else for that matter. Once again, thank you.
jillydavid profile picture
@Dividend Sensei I wonder if there’s any difference in GOOG vs GOOGL with respect to dividend expectations? I know that at this point the only difference is the vote. Can there be such a difference in the future? Does it make sense to accumulate both tickers?
Alphabet just keeps going down
How did you calculate ROC to find 100% ?
Can you explain more how did you get that result please?
Basit Saliu profile picture
Search, Ads, Maps, Gmail, Android, Chrome, YouTube, Google Cloud and long term growth drivers Waymo, Verily, GV, CapitalG etc. Alphabet Inc. (Google) is a Wonderful company.

Great Article Dividend Sensei.
I just noticed youtube cut the pay for youtubers by 35pct in last days. This is a MASSIVE cut. Looks like ad revenues in Q1 will be crap.. Any thoughts?
mayao floydmany profile picture
google it self is expensive .. not valuation
i have to gather money
@Dividend Sensei awesome article and thank you for the deep work on it too. Love this company, along with Amazon (no kidding), and am looking forward to see how they continue to innovate.

My main question for you, in general terms, is how do you see, realistically, regulation affecting these stalwarts? Personally, I see a lot of political banter, and have seen it for a number of years now, which makes me think the political threats are more bark than bite.

Curious for your thoughts and thanks again for the great read!
Nice, after the stock has already run up 100%, recommend to buy "before everyone else does".
@TunnelUnderTokyo i know right? very insightful how can i not see this coming. fair value of google is 2000-2100.
@TunnelUnderTokyo stocks aren't priced on past performance, they are priced based off of future prospects. Google has a golden balance sheet, golden income statement and, frankly, more money than god. The stock, easily, could be trading at 30x forward earnings which makes it a $3,500.00 stock, minimum. The company will continue to buy back shares. The company will continue to print money (maybe even paying a dividend with their huge cash hoard, eventually).

@Amazon Is Better Than Bitcoin Future prospects tend to be priced into the current price.
Is it still good time to buy $googl? Less than 4% drop YTD
Excellent article. TRINA is sinking in more than ever with high inflation, negative interest for savings accounts, bond exodus and real estate being overpriced. Equity funds 2021 inflows was over $1T. There is a lot more where that came from ($22T). A good portion of inflows are automatically flowing to megacaps. Long GOOGL
We’ve likely all been buying Google, at least I have. It’s a behemoth that everyone should have in their portfolio.
Booban profile picture
@Tdog88 its still very high now. Buying anything after last years hyper jump is risky.
Berserker Bob profile picture
@Booban You're kidding right?
Booban profile picture
@Jonroe Capital no. 2021 was insane. Some kind of pull back is warranted.
Great Article and thanks for providing so much detail.
I believe the stock buybacks will ramp up over the next few years as the company will not be able to make any large acquisitions and has the available cash.
Expect the share count to reduce by 15-20% over the next 5 years similar to what apple has done.
Long since 2012.
@Kmac trading Why not pay a dividend?
@unan2010 I would rather have buybacks. Dividends are overrated.
@unan2010 Buybacks can be preferred for tax reasons.
*Youtube* is one the most valuable assets out there. Give it time..Youtube will do $100 billion in revenue 1 day.
@kiwicarrotcake Possibly, but YouTube is also one of the most expensive assets. $100 billion in revenue could come with $101 billion in expenses depending on how much traction ad blockers have achieved by then.
Love_ Money profile picture
@Michael Foley 101 billion in expenses for YouTube? your post does not make sense.
@kiwicarrotcake I love YouTube and am willing to pay the Premium charge to enjoy it without ads. I know Im not the only one...
Great article! Thx. So, when do I buy more. I would like to retire.
bengalesq profile picture
For every buyer there's a seller. Same shares outstanding since 2014. If everybody buys, everybody is gonna hafta sell.
Michael Dolen profile picture
@bengalesq I haven't paid attention to share count, so it is the same as 2014? This is the reason I largely ignore talk of buybacks when it comes to tech. Usually they're just to offset stock based compensation and often, they don't even fully offset that.
bengalesq profile picture
@Michael Dolen 7.4 vs 7.2 so about the same - I was just joking on the title.
Damoni Kennard profile picture
@Michael Dolen Buybacks (ycharts.com/...) have been going up strongly last few years. Sometimes doubling every 12-18 months. I suspect there will be *a lot* more coming in the near future.

Year Buybacks (billions)

2015 1.78
2016 3.693
2017 4.846
2018 9.075
2019 18.396
2020 31.149
2021 36.81 (only 3 quarters)

2021 is estimated at 48B (36/3*4).
You are the best contributor on here
Dividend Sensei profile picture
@John Valentino Thanks, that's high praise indeed, given the caliber of some of my colleagues like Brad Thomas.
Why can't google buy more than 2.5 millions shares logistically
Dividend Sensei profile picture
@John Valentino

At current valuations that's the most they can buy back in 1-year factoring in the fact that 2 weeks before and 2 days after earnings they are legally forbidden from buying back stock.

Also, there are limitations on how many they can buy without causing the price to meltup.

And finally, there are only so many trading hours in the day.

And only so many broker-dealers they can use to buy shares.

Apple is rapidly approaching their limit of about $100 billion worth per year.

$83 billion in 2021.

Likely a reason the price keeps rising despite valuations getting stretched to the extreme.

In the coming years, analysts expect Apple's buybacks to slow.

$68 billion this year, $51 billion in 2023, and $37 billion in 2024.
bluescorpion0 profile picture
at current price of 2700, Google 20 year return is likely to be no more than 35-50%. 40% over 20 years is horrid. pass.
Dividend Sensei profile picture

You think GOOG is going to only go up 50% in the next 20 years?

What's that based on?

The current PE is 24 and historically it's 26.5.

Here's the consensus forward PE from all 48 analysts.

2022: 24.0
2023: 21.0
2024: 17.4
2025: 14.1
2026: 11.5

If GOOG were flat through 2026 and grows as expected, it would be trading at 11.5X earnings and EV/EBITDA of 8.3.

And now imagine that GOOG keeps growing for 15 years beyond that.

For that to happen GOOG would have to trade at 0.8X earnings.

And for a 50% upside, the PE would be 1.2 in 15 years.

Not 12, which itself is absurd, but 1.2.

As in an 83% earnings yield.
bluescorpion0 profile picture
@Dividend Sensei Pie in the sky assumptions. No I believe it will go up less than 50% in 20 years in real terms. Ok, maybe 10-15 years but what's a decade here or there?

I do not think it is prudent to assume a growth rate above 10-15% long term on such a large company. They can't take over the world. And population is in decline.

terminal PE ratio is also insane. You cannot extrapolate current madness. You have to perhaps use a historical reasoning and say Google is a great company so it will be above market p/e but market p/e in 20 years being 25? Risky. Even if I'm wrong even if it is 100% in 20 years still bad. Hell even if 200% in 20 years BAD. Pass.
@scorpion.north what? Dude Google will double by 2025.
If you don't have Google or Facebook, what would be good?
xlc etf Vs goog
nm10066 profile picture
very bad timing on this analysis, growth stock have a long way to to fall. If you like it today, you will love it tomorrow at half the price.
Dividend Sensei profile picture

Today GOOG trades at 24X 2022 consensus earnings vs a 26.5 historical fair value.

A 50% decline = 12X earnings.

In the last 13 years, including the Great Recession, the lowest GOOG's PE hits was 16.74.
@nm10066 with that conviction I assume you are overweight in shorting all of them, right?
Becuase I’m starting to buy Amazon, Google, and FB right now and I think they won’t fall even another 5%. Rates are going to 0.5%, not 5%.
@Dividend Sensei kill ‘em with facts, I love it.
There is a huge risk to profitable monopolies like Google, Facebook and Twitter. If the Republicans get back in and that is looking increasingly likely they will be broken up, heavily regulated or both.

The mistake they all made was getting political. They could have just continued to make huge profits and sit on the sidelines but no they got into politics
Booban profile picture
@ar180b They were forced to, or they would get cancelled.
Love_ Money profile picture
@ar180b Don’t think these giants can be broken up easily. There would be huge battle before it can actually happen.. They have much better lawyers than the government.
Booban profile picture
@Love_ Money That's true, but other things can happen. They have already changed names so the govt. can't find them.
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