Why does apple not pay dividends?!?

Discussion in 'General Mac Discussion' started by egor, Jan 11, 2006.

  1. egor macrumors regular

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    Jun 3, 2004
    #1
    This is primarily out of curiosity.. whilst I do invest based on stock movement I am not likely to invest in aapl.

    I was just wondering, why does apple not pay dividends, at all? When did this start? Why did it start? I've looked and I can't seem to find anywhere where apple has given a reason.

    Partly why I won't invest.. even though many short term investors don't intend to profit on the dividends they still know they are ultimately what fuels the stock price.. so to me because aapl is unlikely to ever be met with a takeover bid it is infinitely overvalued. Its almost like its just one big collaboration of investors that all know it is pretty much a game.

    But anyway, back to my question, anyone got any answers?!?
     
  2. WildCowboy Administrator/Editor

    WildCowboy

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    Jan 20, 2005
    #2
    Think of it this way...when a company has to pay investors a dividend, that is money that the company would otherwise be able to keep. And it would use that money to reinvest in itself and create more value for the company, which is really what drives stock prices. So if you think you can do great things with your $20 dividend, invest in a stock that pays one. But if you trust a company like Apple to instead use the sum of everybody's dividend (think of it that way) to create even more value than you would be able to, Apple is better off with the money.
     
  3. egor thread starter macrumors regular

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    Jun 3, 2004
    #3
    Yes, I understand why some companies don't pay dividends, my question was regarding apple specifically.. a company that has a large amount of surplus cash it does not reinvest and also a company headed by someone that as far as we know owns no shares in it (assuming he doesn't via a proxy).. ergo it looks unlikely that apple will ever pay dividends (thus making any investment in the company meaningless to most people) which is why I'm asking.. have they ever tried to justify it?

    What I'm more or less trying to get to here is have they ever mentioned dividends at all.. indicated they may pay dividends in the future, that kind of thing, to the best of anyone's knowledge?
     
  4. WildCowboy Administrator/Editor

    WildCowboy

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    #4
    Why on earth would you say that any investment in the company is meaningless to most people? Rather than taking dividends along the way, I took it all at the end when I sold my AAPL stock today...for a nice hefty profit.

    Dividends are favored by people who don't know anything about the stock market and like to see checks roll in every quarter...often older people on fixed incomes.

    As the average investor has become smarter and more involved in the investing process, there is less reliance on steady cash flow and more interest in maximizing stock price performance.

    Fewer and fewer companies are giving dividends, and the ones that do are generally mature companies with low capital expenditure requirements. Not growth companies like Apple.

    Yes, Apple is sitting on a nice pile of cash (though not nearly as big as some other companies). Tech companies need large cash reserves (see Google's recent supplementary stock offering to raise a few billion bucks). What if Apple wants to buy out another company whose technology looks promising?

    Oh, and I haven't heard anything about them planning to offer dividends in the future. I certainly hope they don't.
     
  5. egor thread starter macrumors regular

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    Jun 3, 2004
    #5
    You don't seem to understand.

    The investment is meaningfull in the sense that it is good news, with most companies good news equals higher dividends down the line and a higher dividend growth rate.. the market adjusts the price of the stock accordingly even though many people are not interested in the dividend (but interested in people being interested in the dividend; ie. long term investors).. with apple good news merely means many investors mutually agree to buy apple shares at that particular time, the premise of the investment almost works in a similiar vain to pump and dump schemes, minus the moral questionability. But in a real sense the investment is meaningless.
     
  6. egor thread starter macrumors regular

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    Jun 3, 2004
    #6
    I forgot to add. Dividends are favored by people that understand perfectly well what fuels stock prices.. what matters to other people when buying shares should matter to the wise investor, regardless of what that may be. Dividends matter to most people therefore they are favoured by all kinds of investors.
     
  7. WildCowboy Administrator/Editor

    WildCowboy

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    #7
    You're right, I guess I don't understand.

    The generally accepted idea is that non-dividend stocks do better in bull markets, while dividend stocks do better in bear markets. In high-growth environments, companies and investors are better served by putting that money to work inside the company. In slow-growth environment, the money is better off in the investor's pocket because the company can't do a whole lot with it. The tech industry is a high-growth market, and that's why you see very few tech companies paying dividends.

    And yes, if that's your definition of meaningless, then non-dividend investments are meaningless. So is real estate, and so are pork belly and orange juice futures. The vast majority of investment opportunities are based on the idea that you're betting that someone else down the road will pay you more for your widget than you paid for it. There is risk involved there, and that's why it pays better than an savings account.
     

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