Apple Preparing to Offer 'Significant' Dividend for Investors Early Next Year?

[GfPQqmcRKUvP]

This thread really typifies how much the average person doesn't understand finance and the capital markets.

When you buy one share of Apple right now you're buying two things. The first is an incredibly innovative and profitable tech company. The second thing you're buying with your hard earned cash is...more cash. Cash that's not earning a return.

Declaring and paying a dividend isn't an admission that there aren't growth opportunities provided they still have enough cash flow and cash reserves to invest heavily in the future. They clearly do. Even after M&A activities, R&D, and capital expenditures, Apple has enough cash flow to declare a 3% dividend without even touching their huge stockpile of cash. People who are against this dividend don't really understand that it wouldn't affect the decisions Apple makes in the future regarding growth. This is not the case of a company without a stockpile of cash and with low cash flow deciding that they're better off giving the shareholders money than investing in their core business. This is the case of a company with so much money and positive cash flow that they can literally invest as much as they want in their core business and in anything they want and still have so much left over that NOT paying a dividend is just nonsensical. I don't know about you guys, but I want to invest in a company that can give me a great return on all the money I invest, not just the part of my money that went to buying cash.

Red Oak said it best:

A 3% dividend would cost Apple about $11 billion a year. Apple is generating over $40 billion a year in cash flow.

So, even with this large dividend, they will be adding substantially to their cash hoard at a rate of $30 billion a year

Put another way, Apple will approach $200 billion in cash in three years even with a 3% dividend

It's a cash generating machine. I don't see how paying it would affect their ability to aggressively invest in its businesses

 

[Abazigal]

Apple is worth 350 billion. 80 billion of that is cash.
That means Apple's value is "only" 270 billion.

So even if Apple doubles its worth to (2 * 270) + 80 = 620 billion, the stock grows only by 77% (because the cash is mostly just sitting there and definitely not growing as fast as Apple).

The point is this: the cash pretty much belongs to the shareholders. But they don't control it and much of it is just sitting there. A dividend means they can use that money to buy more Apple stock, meaning faster growth.

A stock buyback has the same effect, by the way.

How would a stock buyback mean faster growth? You do that only if you think your stock is currently undervalued at the moment.

Say Apple redistributes some of its excess cash as dividends back to its shareholders. They then pump the money back into the company. Apple simply gets back the money it had paid out earlier. It hasn't really earned any money.

Plus, after the dividend is paid out, won't Apple's share price drop to reflect its new net value? At the end of the day, the shareholders shouldn't be any better or worse off than if they had simply sold their existing Apple shares on the open market.

The only reason for a dividend would be if the shareholders believe they can reinvest their money at a higher rate of return outside than if they continued to leave their money with Apple.

 

[robogobo]

why would anyone invest in apple these days if they were not going to give out a dividend? their stock is not going to $600. the largest market cap company should share the wealth with the shareholders. i'm interested in the percentage not the amount. viva los apples.

You sure about that? Projections beyond $500 are set for 2012. While it may never reach $600 simply because a split makes sense well before then, it's a pretty good bet it's going nowhere but up in the long run. The market cap is over $950bn. Anyone who isn't a hothead analyst looking or attention knows there's no motive for Apple to offer dividends. It would basically be just giving money away that's better invested elsewhere. If you want to make money with
Apple, buy stock now, sell it later. Don't expect handouts.

IMO, dividends are cheap tricks done in times of weakness. They don't really make sense for a strong company unless it's employee owned.

 

[vrDrew]

Why are people down voting this story? Is it badly written?

Ultimately the purpose of any corporation is to pay dividends. Apple has built up the largest cash hoard ever amassed by an industrial company, it also has strong cash flow from operations. If and when Apple's board decides a dividend is appropriate, then it will happen.

 

[divinox]

This thread really typifies how much the average person doesn't understand finance and the capital markets.

When you buy one share of Apple right now you're buying two things. The first is an incredibly innovative and profitable tech company. The second thing you're buying with your hard earned cash is...more cash. Cash that's not earning a return.

Declaring and paying a dividend isn't an admission that there aren't growth opportunities provided they still have enough cash flow and cash reserves to invest heavily in the future. They clearly do. Even after M&A activities, R&D, and capital expenditures, Apple has enough cash flow to declare a 3% dividend without even touching their huge stockpile of cash. People who are against this dividend don't really understand that it wouldn't affect the decisions Apple makes in the future regarding growth. This is not the case of a company without a stockpile of cash and with low cash flow deciding that they're better off giving the shareholders money than investing in their core business. This is the case of a company with so much money and positive cash flow that they can literally invest as much as they want in their core business and in anything they want and still have so much left over that NOT paying a dividend is just nonsensical. I don't know about you guys, but I want to invest in a company that can give me a great return on all the money I invest, not just the part of my money that went to buying cash.

Red Oak said it best:

QFT. I dont own stock in tech, clothing or what-not to have them do financial investments; they money they have no use for should be paid back to me, the investor. Use what you need, pay out the rest. Simple.

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Why are people down voting this story? Is it badly written?

Ultimately the purpose of any corporation is to pay dividends. Apple has built up the largest cash hoard ever amassed by an industrial company, it also has strong cash flow from operations. If and when Apple's board decides a dividend is appropriate, then it will happen.

Not sure if its the largest cash hoard, but its large, for sure - mainly due to them not paying out dividends (and stock repurchases?). Compare with MSFT, for example. Last i checked, they had 50bn in cash. From 2000-2010, they paid out nearly 170 bn in dividends and stock repurchases. Had they not, they would've had +200 bn in cash --- but to what use? Hoarding cash is nothing but inefficient allocation of capital. Simple as that.

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You sure about that? Projections beyond $500 are set for 2012. While it may never reach $600 simply because a split makes sense well before then, it's a pretty good bet it's going nowhere but up in the long run. The market cap is over $950bn. Anyone who isn't a hothead analyst looking or attention knows there's no motive for Apple to offer dividends. It would basically be just giving money away that's better invested elsewhere. If you want to make money with
Apple, buy stock now, sell it later. Don't expect handouts.

IMO, dividends are cheap tricks done in times of weakness. They don't really make sense for a strong company unless it's employee owned.

Dividends always makes sense from a resource allocation optimization perspective. Apples core business is not making (financial) investments, nor is that the reason why people own AAPL stock. If anything, having to much capital is a risk. Thus, you are wrong. Not paying dividend is basically not giving money away thats better invested elsewhere; Apples return on cash is more than likely sub-par. And even if it weren't, its still not their core business.

TL;DR: Apple should keep money it can put to use, the rest should be paid back to the shareholders (and in turn, the market) to allow for more efficient resource allocation. Econ 101.

p.s.

How the hell is a dividend a handout? If i own 10% of a company, i essentially own 10% of the cash of that company. In essence, i'm just getting whats rightfully mine.

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How would a stock buyback mean faster growth? You do that only if you think your stock is currently undervalued at the moment.

Say Apple redistributes some of its excess cash as dividends back to its shareholders. They then pump the money back into the company. Apple simply gets back the money it had paid out earlier. It hasn't really earned any money.

Plus, after the dividend is paid out, won't Apple's share price drop to reflect its new net value? At the end of the day, the shareholders shouldn't be any better or worse off than if they had simply sold their existing Apple shares on the open market.

The only reason for a dividend would be if the shareholders believe they can reinvest their money at a higher rate of return outside than if they continued to leave their money with Apple.

1) Yes.
2) Yes, with "money" being keyword; i.e. if they can get better return on (that surplus) cash than apple can. And for all reasons, they should expect that; Financial investment is not Apples core business.

 

[cameronjpu]

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Gee, now they can be like MS. Pay a dividend and the stock goes nowhere for 10+ years.
I see dividends as a last ditch effort to get people to buy your stock. Especially in tech. It's like admitting defeat.
Name one tech company that pays a dividend and still has good stock price appreciation.

Steve had the right idea, IMO.

Dumb

 

[johnnymg]

Why are people down voting this story? Is it badly written?

Ultimately the purpose of any corporation is to pay dividends. Apple has built up the largest cash hoard ever amassed by an industrial company, it also has strong cash flow from operations. If and when Apple's board decides a dividend is appropriate, then it will happen.

Because they incorrectly think declaring a dividend implies the end to growth and innovation at Apple. Again, I must emphasize "incorrectly" here!

cheers to the longs
JohnG

 

[cameronjpu]

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It's called the whole point of listing stock. To increase value to the owners of the company. Please don't post until you've educated yourself.

 

[samcraig]

So much hate with you against that guy for having his opinions, that may sometimes be hypocritical and wrong. But who doesn't?

All your recent comments inflict a lot of hate against the guy. He may be a big fan sometimes, but you just sound sad, really. It's great that you're not really banned for this continuous assault.

I don't hate LTD at all. And often I agree with many of his comments. I don't always/mostly agree with the way he presents his comments or his inability to look beyond Apple. But you know what - LTD is a big boy - he can take care of himself and always has when we've engaged each other in discussion. We also can part the discussion when we clearly don't see eye to eye.

That being said - you COMPLETELY misunderstood my comment. It was in no way a knock on LTD or implying he was WRONG.

My comment was made because LTD himself stated that he hopes that Apple never gives a dividend. That he hope post-Jobs - that they stay the course. My comment wasn't about him being wrong but acknowledging his view and that he was obviously going to be upset.

But you obviously didn't get that. And clearly your bias "against" me colors anything I say.

Maybe you can hate people on this board for their opinions - but don't project that onto me. Hate is a VERY strong emotion and it's definitely not one I'd ever use to describe someone on here LOL.

 

[JHankwitz]

Gee, now they can be like MS. Pay a dividend and the stock goes nowhere for 10+ years.
I see dividends as a last ditch effort to get people to buy your stock. Especially in tech. It's like admitting defeat.
Name one tech company that pays a dividend and still has good stock price appreciation.

People invest in companies to get a return on their investment. Paying back a percentage of profits each year keeps them invested.

Relying on stock price appreciation is crazy since you could loose everything while the company still turns a profit since stock prices are driven by stock demand, not company profits.

 

[cameronjpu]

Speaking as stockholder I'm not too excited about a dividend. I'm somewhat certain that Apple can turn money into more money far FAR better than I can. I'd rather let them do that instead of giving it to me.

It'll be better for me in the long run, and the long run is why I'm into it.

How? Right now it sits in a bank earning zilch. They make tiny acquisitions. Sorry folks apple has already "run out of better things to do with that money" (TM). They know very well how to make more money, but it doesn't require lots of that cash to earn that money. Hence the dividend so I can take the money and put it to better use.

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2. the company board has absolutely no idea how else to build value with its cash

What exactly gives you the idea that Apple knows how to build value with its cash? It's been growing for a decade, and over that decade Apple has used ABOUT one quarter's worth of current cash flow in buying companies. So, they don't know what to do with it, which is why they should return it to shareholders.

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No possibility some of those profits could be funnelled to the poorest of the poor, instead of making wealthy people wealthier?

Absolutely. Take the dividends that Apple sends you and give them away. If you're implying that the government should take them from Apple first, that's the best way to make sure very little goes to people who really need it.

Or do you not consider yourself rich enough to do that. Should be someone else's job, right?

 

[applesith]

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I don't want a dividend. If I did, I would have bought a different stock or would sell some AAPL.

Apple should keep the money for R&D and buying supply chains. If they start paying dividends, it will become expected.

 

[cameronjpu]

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I don't want a dividend. If I did, I would have bought a different stock or would sell some AAPL.

Apple should keep the money for R&D and buying supply chains. If they start paying dividends, it will become expected.

Heh, that's funny, kinda a nice mirror of what the other idiot said when he said that people who want a dividend stock can just sell Apple and buy one. Well, I guess you can just sell Apple and buy a stock that doesn't return real money to the owners. Enjoy that!

In case you haven't noticed, Apple hasn't been able to spend all the cash it's generated in a very very very long time. So Apple is just sitting on it, hurting shareholder value. Time to unlock that value, don't you agree? Nah of course not, because you don't understand finance.

 

[samcraig]

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I don't want a dividend. If I did, I would have bought a different stock or would sell some AAPL.

Apple should keep the money for R&D and buying supply chains. If they start paying dividends, it will become expected.

You think they can't do both? That doesn't say much about Apple then does it. I'm pretty confident that if/when they give dividends - it's because they know they can LOL

 

[Les Kern]

Oh WONDERFUL, the 1%-ers are just a liiiiitle bit richer! I LOVE it! Oh sure a few percentage will go to the 401K's and such, but you know... eventually it will be stolen from you just like the last time. (There's a party, and you're not invited)
So thanks Apple. Thanks for not building a plant here. Thanks for over-charging for your wares, and thanks SOOOO much for funneling more money uphill. God know those people need another ****ing yacht.

 

[Small White Car]

Oh WONDERFUL, the 1%-ers are just a liiiiitle bit richer! I LOVE it! Oh sure a few percentage will go to the 401K's and such, but you know... eventually it will be stolen from you just like the last time. (There's a party, and you're not invited)
So thanks Apple. Thanks for not building a plant here. Thanks for over-charging for your wares, and thanks SOOOO much for funneling more money uphill. God know those people need another ****ing yacht.

You do know that there are a lot of us in here who own stock who are not even close to being rich, right? This is called my 'long-term savings' and it's not so I can vacation in Europe next summer. It's so I can send my kid to college some day.

So you should also know that when you say things like that it just makes you look silly, right?

Or does my 8 year old Honda Civic really make you jealous? If so, I'm sorry about that, but it's not fair to refer to it as a 'yacht.'

 

[cameronjpu]

You think they can't do both? That doesn't say much about Apple then does it. I'm pretty confident that if/when they give dividends - it's because they know they can LOL

Don't be silly - that 80 billion in the bank is key to Apple's growth! Didn't you see? They paid $2 billion up front from flash memory! Without those extra $78 billion they never could have afforded it.

 

[69650]

As a non shareholder I would rather see Apple keep the money and invest it in great new products.

As far as I'm concerned if you want to buy Apple stock you know the score - no dividends. If you don't like it then go buy another stock. There are plenty to chose from who will give you a dividend.

It's just rich people looking to get even richer and screw the rest of us.

As for 3% dividend - it wouldn't stop there. I can get more than 3% on my savings now from banks savings accounts. The shareholders would want 5% next year, then 10% and so on.

 

[Abazigal]

No possibility some of those profits could be funnelled to the poorest of the poor, instead of making wealthy people wealthier?

That's precisely the point of investing in shares, to reap a return on your investment, not see your money be used to benefit the poor.

Don't be silly - that 80 billion in the bank is key to Apple's growth! Didn't you see? They paid $2 billion up front from flash memory! Without those extra $78 billion they never could have afforded it.

Just because Apple doesn't need the money now doesn't mean they won't need it in the future. For all you know, maybe they might find themselves needing to splash out a much larger sum for some even greater-scale acquisition for the next big thing?

 

[carmenodie]

I don't have any vested interest in AAPL, but I hate it when analysts try to drive up with dividend speculation rather than focusing on fundamentals. I find that irritating. Anyway I thought they were keeping funds on hand to allow them to buy into things which might help the long term interests of the company.

Apple is a case study in world class superior management and those thugs on Wall Street just want the money. If Steve was alive, 45 and in tip top condition he would tell Wall Street to kiss his a**!
I like Tim, god speed to him, but Apple can't afford to make any mistakes right now or they are dead.

 

[chezhoy]

I get $0.50 per share per quarter owning Verizon (VZ) at $38 a share...more bang for my buck.

I think I calculated a little while back that based simply on the interest Apple is making off of their cash, they could offer a dividend of about $.50 per quarter... and that doesn't even touch profits.

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You could have had it at $100 a share 3 years ago when I had it (didn't hang on for long because I needed money).

A stock split would be great. Most if not all inverters like to buy and sell in units of 100. When a stock is approaching $400 that puts many people out of the market. A stock price of $100 is much more approachable. $50 would be nice.

One advantage of paying a dividend is it destroys people who short the stock. If you short sell a stock and it pays a dividend, YOU are responsible for paying that dividend to the loaner of the stock. Think of it as anti short insurance.

Note: Just because a company pays a dividend, that does not force you to take cash. Dividend reinvestment programs are nice.

 

[jonnysods]

I'm okay if they don't, but heck, I own one share! So bring it on

 

[Digitalclips]

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Forgive my ignorance, but if these investors are looking for money from a stock that hasn't offered a dividend in 17 years, can't they just sell?

"calls for the company to return some of that money to shareholders have been on the rise"

Cake and it eat?

 

[pmz]

Lot of ignorant people in here comparing Apple to every other company. They can write a few thank you checks and continue to grow and hoard their billions while the world suffers. Relax folks.

 

[Gasu E.]

There still isn't an upside for them. I see wanting to get return on investment but I've always believed that increase in share price should be the goal of shareholders not milking profits away from the company.

Edit funny wiki quote "Proponents of this view (and thus critics of dividends per se) suggest that an eagerness to return profits to shareholders may indicate the management having run out of good ideas for the future of the company"

What you don't realize is that relying on increasing stock value without any hope of an actual dividend is essentially buying into a Ponzi scheme.

The entire reason a stock has value is because it is a claim on a future payments-- most commonly, dividends. Without future dividends or some other cash payment, the stock is just a piece of paper.