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Google needs to pay up ... now: O'Leary

"Shark Tank" investor Kevin O'Leary has a message for Google: start paying up investors now.

"We're almost 20 percent down on Google. Don't you think it's time that Google made itself attractive to me by providing a 2.5 percent dividend? And maybe now I'll trade it as a real company," the founder of O'Leary Financial Group said in a "Squawk Alley" interview.

On Tuesday, Google traded near a 52-week low, recovering slightly from a 19 percent fall from its all-time high. A few analysts have downgraded the stock lately. Stifel Nicolaus said last week the best days for Google shares may be in the rearview mirror.

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There is nothing that Google can do on the product front to change O'Leary's mind, he said, and it needs to realize investors are going to determine whether Google finds a place in value portfolios, he said.

O'Leary called on the tech company to stop investing in "wow factor ideas that don't make cash flow" and to start focusing on generating capital returns for shareholders. Google should also admit that its growth story has slowed as users migrate to other services like Instagram and Twitter, he said.

"Either buy those guys or realize that your growth story has softened, but above all, pay daddy. Time to start paying me something, and I might by the stock," he said.

O'Leary dismissed the notion that Google needs to spend money in certain categories, such as video content, rather than giving it to investors.

"When you have a culture of just spending and trust—in other words, don't worry about it, everything I put my money into is going to provide a great return to shareholders—that story always ends in tragedy," he said.

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Instead, O'Leary believes Google needs to strike a balance. It must deliver great growth by picking the right opportunities and exercise discipline and realize that 70 percent of returns come from dividends over the long term, he said.

Apple has come to that conclusion and investors now see it as a good buy because the company is growing and innovating while paying shareholders a dividend, he added.

"That's how you provide stability. That's how you provide overall long-term performance. And you have less volatility. Who wants a 20 percent loss in Google in six months?" O'Leary asked. "I don't want that. I don't want that stock. They've got to show me respect and some cash back, and they've got to do it now."

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He also called Amazon.com a bad buy, saying the buzz drummed up by the company's announcement that Woody Allen will write and direct a series for its studio has nothing to do with the investment thesis.

"If you have to use the words 'buzz' and 'cache' to entice consumers and investors into the stock, I think that's bad," he said. "I like the words 'cash flow after capital expenditures,' 'low price earning ratios' and 'compounded cash growth quarter to quarter.' That's sexy to me. I get excited about that," O'Leary said.

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