With Google stock now over $500 per share, investors need to stop and think about whether Google stock is worth buying.

It’s pretty clear that Google has the makings of a great company. They have the best search engine on the web, they attract top talent, and they appear to have good vision for the future of the Internet. But I’m still not convinced it’s worth $500 a share, and here’s why.

First off, Google has publicly declared that they do not plan to pay dividends, ever. Here’s a quote from Google’s Investor web site:

Does Google pay a cash dividend?

No, we have never declared or paid a cash dividend nor do we expect to pay any dividends in the foreseeable future.

Why would anyone buy stock in a company that never pays dividends? How will you ever get your $500 back if the company never pays its shareholders? Maybe Google will change their mind and someday start paying dividends, but most Google owners I know bought because they think that they will be able to sell their shares for a higher price in the future.

But is $500 cheap or expensive? What if I told you that Google shares were $1,000? Or $10,000? Would you still be a buyer? Most people have no idea how much Google as a company is worth. Prior to this post, I had no idea either. Fortunately, all it takes is a simple investigation of GOOG at finance.yahoo.com to find out.

Right now Google has $10 billion in cash. Wow! That’s a lot!…except that there are a lot shares out there so that cash per share is only $34. In total assets (including property, computers, etc.), Google is worth only $47 per share. If Google were liquidated right now, your $505 share of stock would be worth $47. Not a great deal.

What about cash flow? In 2005, Google earned $2.5 billion in operating profits. If Google earned $2.5 billion annually, it would take 39 years before Google should be worth $505 per share. Even if Google’s profits grew at an amazing rate of 25% per year, it would still take 10 years before the company would be worth $505 per share. And that’s just to break even!

Say my investment horizon for Google were 10 years and that I was hoping to earn a 10% annualized return on my money. That means that I’m hoping to sell Google stock for $1,310 in the year 2016. For this to happen, Google’s profits would have to grow at an incredible 42% per year, at which time they would be around $83 billion.

By comparison, Microsoft’s average annual profit for the last three years was around $15 billion. And they own Windows! (on a side note, Microsoft paid out $36 billion in dividends last year. Google paid out, you guessed it, zero)

Finally, let’s compare Google to another company that never pays dividends: Warren Buffett’s Berkshire Hathaway (BRK-A). Berkshire Hathaway’s current stock price is $107,610. Wow! But a look at the company balance sheet reveals that Berkshire holds assets worth $66,293 per share, $27,392 of which is cash. If the company continues to earn $9.5 billion profit per year as it did in 2005, it will take only 3 years for Berkshire as a company to be worth it’s current stock price. Now that’s a stock worth buying! (ps. Berkshire is one of my top picks these days. I “bought” BRK-A in my fake Yahoo portfolio for $99,000 in August…too bad I don’t have any real money…doh!).

Warren Buffett is no dumb-dumb. Berkshire Hathaway has $45 billion in cash right now because Warren is waiting for a good buying opportunity. Warren looks for stocks that have intrinsic value rather than ones that he thinks he can sell to the greater fool. I’ll let you know if he buys Google stock, but until then don’t hold your breath.