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> its announcement of a first-ever cash dividend of 20 cents per share

Ok so there has never been a dividend payment so far, so all the money investors get out from Google is from new investors that get in?

Is that even allowed?

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All the money investors have gotten from Google has been in capital gains (i.e. buying low, selling high). There's nothing illegal or nefarious about that. In fact, it's extremely common, most stock investors gains will be from the underlying equity increasing in value. Dividends are just distributions that the company pays from it's available cash.

No, the money for the dividend comes from Google's profits. Google is a very profitable company.

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