Motley Fool: Google this

Google parent company Alphabet (Nasdaq: GOOG) (Nasdaq: GOOGL) has been battling economic headwinds, such as unfavorable foreign exchange rates and weak consumer spending resulting in shrunken advertising budgets. Third-quarter revenue rose just 6% year over year to $69 billion (or 11% in constant currency), while earnings dropped 24%.

That said, Alphabet’s long-term prognosis is good. Google is by far the dominant search engine globally, and that competitive advantage has propelled it to the top of the advertising industry.

Alphabet has also developed a strong presence in cloud computing. Google Cloud Platform (GCP) ranks a distant third in market share for cloud infrastructure and platform services (CIPS), but analysts at Gartner recently noted, “GCP had both the highest percentage of revenue gains and improvements” across critical CIPS capabilities of any provider during the past year.

With leading positions in digital advertising and cloud computing – two large and expanding markets – Alphabet is well positioned to grow. It seems attractively priced, too, with a price-to-earnings (P/E) ratio recently below 19, and shares having fallen more than 35% year to date. (Suzanne Frey, an executive at Alphabet, is on The Motley Fool’s board of directors. The Motley Fool owns shares of and has recommended Alphabet.)

Ask the Fool

Q. What are dividends in the stock world? – P.D., Shenandoah, Iowa

A. They’re payments from a company to a shareholder.

A company can do various things with its money, such as paying down debt, or investing in further growth by hiring more workers, building more factories and so on. When executed well, those moves can benefit shareholders in the long run.

The company might also reward shareholders more directly. One way is to repurchase shares, which leaves the remaining shares more valuable. Another is to provide dividends to shareholders; this is typically via quarterly cash payments, though sometimes it’s with stock.

Investing in healthy and growing companies that pay dividends is a great strategy, but some terrific companies don’t pay dividends – often because they’re still growing rapidly and want to invest their money in furthering their growth.

Q. What is the U.S. inflation rate, and how does it compare to that of other countries? – T.G., Westwood, New Jersey

A. Our annual inflation rate was recently 8.1%, according to the International Monetary Fund, well above our long-term average of about 3% per year. People have paid a lot of attention to inflation in the U.S. lately, but much of the rest of the world is facing steep inflation as well.

Here are recent annual inflation rates for many countries, in ascending order: Switzerland and Taiwan: 3.1%, Bolivia: 3.2%, Norway: 4.7%, France: 5.8%, Canada: 6.9%, Mexico: 8.0%, Germany: 8.5%, Italy: 8.7%, Botswana: 11.2%, Poland: 13.8%, Nigeria: 18.9%, Czech Republic: 16.3%, Ethiopia: 33.6%, Turkey: 73.1%, Venezuela: 210%, Zimbabwe: 284.9%.

Those yearly rates are jarring, but not unheard of. When inflation reaches 50% or more per month, that’s considered “hyperinflation,” a miserable economic situation.

My smartest investment

The smartest investment I know was my grandmother’s. She bought shares of United Telephone and Electric back in 1927. It was a small company then, buying up telephone companies and other businesses. Her banker was pessimistic about its future and advised her to sell her shares, but she didn’t. I received some of her shares as part of her estate, and by then, after various mergers and convolutions, they were shares of Sprint and worth tens of thousands of dollars.

The Fool responds: Your grandmother did what is not easy for many investors to do – she held on for decades, through good times and bad times, letting her investment grow over time. Not every company will keep growing for decades, so one should never just hold blindly for a long time. But as long as a company is growing and is poised to keep doing so, it’s often a smart move to take no action and just be patient.

Sprint’s history is a complex one. It’s now part of T-Mobile US, having merged with it in 2020. With a recent market value near $180 billion, T-Mobile is one of the largest telecommunications companies in the U.S., along with AT&T, Verizon and Comcast. It expects its 5G network to cover 97% of Americans by the end of the year and its ultracapacity 5G network to cover 90% by the end of 2023.