Apple Announces Plans to Initiate Dividend and Share Repurchase Program

[69650]

But it wouldn't. Almost every very large acquisition Apple could make would be acquiring a company with lower profit margins. Or less steady long term revenue prospects. It also means more people added to cover a larger group of products over a broader market.

Acquiring would boost "top line" numbers but it wouldn't boost bottom line numbers at the same rates that organic (internal) growth currently does. There is zero reason to appeal to non-internal growth when growing at a relatively high rate. There is perhaps a bit of freak out where Apple would have to invent top line growth to match some of the expected revenue growth built into the stock price but they don't really "need to" do that until the internal growth rate cools off alot.


There is no way Apple can soak up the parts suppliers without going into the part supplying business. They don't want to be in the part supplying business. That's not what they do.

So buying Adobe would mean they'd have to keep all of the non OS X and iOS aspects of that business. Shipping Windows programs. Creating programs for Android etc. etc. They is no way they could generate a 5-8% return on those businesses if they killed off the non Apple parts and just increased the amount of proprietary Apple focus.

That's one reason why Apple buys relatively small stuff. Low number of people added. If they happen "kill off that business" to re-purpose it to a different Apple agenda, then it is just 'noise' on Apple's balance sheet.

They could buy Adobe and merge it into their Filemaker business. Start to build a portfolio of pro app's again. Filemaker runs at arms length from Apple but they still show up on Apple's accounts.

Not everything has to be about what is best for Apple shareholders. How about what is best for me as a customer. How about Apple saying thanks for paying top dollar for our hardware products, here's some great software from us to go with it.

It seems to me like they don't want to do this because if they get there way you will only be able to buy any software for your Mac through the AppleStore, giving Apple 30% revenue in return for doing very little. The software makers just factor that 30% into their prices so in the end we the customers just end up paying 30% more for our Mac software. I'm sure that helps their profits but it doesn't help me much as a customer.

 

[basesloaded190]

You never really know what's going to happen, so it is safe (and smart) to keep some money in the bank.

It's not because your on the top of the world today that you will still be in 10 years.

I'm not the only one who thinks this isn't a whole lot.

http://blogs.smartmoney.com/advice/2012/03/19/why-apples-record-dividend-looks-stingy/

 

[rotorblade69]

So there's HFT AND no liquidity? Well wouldn't that be interesting.

Anyway, it's very amusing reading everyone's comments on how Apple is wasting its money on dividends. The whole point of a public company is to return money to shareholders! That's its purpose.

Do you know what HFT means??

Do you know what low volume and very little liquidity in the market means??


Its not wasting its money on dividends.

 

[milo]

...If I just put the cash in the bank instead at 3% interest I would get $1800.

Is any bank offering anywhere close to that?

And don't forget, investing in company stock you also make money when the stock price goes up.

 

[TheBronx]

The only people unhappy with this are of course those who don't own shares hehe.

 

[milo]

The only people unhappy with this are of course those who don't own shares hehe.

I own shares and while I don't think this is a bad idea, I would have rather seen Apple invest that money into making the products better and hopefully making investors more money through a higher stock price.

 

[TheBronx]

I own shares and while I don't think this is a bad idea, I would have rather seen Apple invest that money into making the products better and hopefully making investors more money through a higher stock price.

The stock price is in no danger of going down to the point where millions are losing money, nor could they have done anything to catapult the price to 4 figures in a week. It's going to fluctuate but go up overall like their prices always do.

 

[cvaldes]

I own shares and while I don't think this is a bad idea, I would have rather seen Apple invest that money into making the products better and hopefully making investors more money through a higher stock price.

Uh, they are only using a fraction of their cash for the dividend payouts and share buyback program.

They are planning to spend $45B over three years, thus an average of $15B per year. Today Apple is accumulating more than $15B a year.

Note that the share buyback program is mostly to offset share value dilution due to RSUs.

They still have plenty of cash for running their business: acquiring suitable companies, leveraging component purchases, investing in real estate/new facilities, etc.

 

[69650]

Is any bank offering anywhere close to that?

And don't forget, investing in company stock you also make money when the stock price goes up.

I can get today between 3% and 5% interest on savings accounts in the UK. The rate depends on whether you want instant access or are willing to lock the cash away for a fixed period.

Have a look at this if you don't believe me.... http://www.moneysavingexpert.com/savings/savings-accounts-best-interest#fixed

 

[GfPQqmcRKUvP]

Do you know what HFT means??

Do you know what low volume and very little liquidity in the market means??

Lose the condescension. All else being equal, HFT increases liquidity. Take a look at bid/ask spreads since 2005 (especially in midcaps)...

Its not wasting its money on dividends.

I wasn't directing that comment at you, hence the new paragraph.

 

[organerito]

Steve Jobs would have not approved it.

So what? He is dead.

 

[notanalien]

I'm not sure if my maths are correct but...

If I invest $60,000 in Apple stock at $600 a share that gets me 100 shares.

$2.65 per quater dividend equals $10.60 per year per share.

Multiply that by 100 and I would get $1060 in dividends per year.

If I just put the cash in the bank instead at 3% interest I would get $1800.

So I would still need the share price to rise steadily to really make any money on Apple stock.

Bank accounts don't give 3% these days. You'd be extremely lucky to find 0.3% interest on a bank account. They can borrow from the fed for essentially 0% interest, so they have no motivation to give interest rates to people with savings accounts.

 

[iDisk]

Apple will lose some value, as dividends are notorious for not providing equal stock value, i.e. shares don't raise $10.60 due to a $10.60/share dividend announcement.

So there's some value lost, obviously, which is a surprise to Apple. Cook is somewhat more businesslike, so I guess this simply was a way to appease large investors. Usually Apple is like Billy Beane of the Oakland A's, making smaller purchases that it hopes will be strong long-term gains that fit into it's current model and do a specific task.

I own Apple shares so I'm pretty excited about this from a personal perspective, but honestly I never bought Apple shares because I thought I'd get a dividend. Share appreciation has made me enough money for me to be happy. Would rather them continue what has worked for the past few years and keep their money for purchases. Hope this is a "we have too much cash so might as well" move rather than a "we have too much cash and nothing to do with it" move.



This was definitely talked about between Cook and Jobs. Despite this vision of Jobs the innovator and magician, he also was a businessman and had to answer to shareholders. This was a move that was discussed—probably in depth—before Jobs' passing.

And, considering consumers are purchasing Apple products at record numbers, they really don't need to do anything for the consumer right now. They answer to shareholders (owners of the company), not the customers.

Jobs made it clear in the bio that shareholders operate at His beat. Hence why a dividend was always shot-down under his watch

A dividend has nothing whatsoever to do with "product vision." Even with the dividend, the company will still be adding $40-50 billion to the cash hoard annually. It hardly makes a dent. In reality the question of how the company will use all that cash will continue to be raised since the accumulate rate has hardly been touched with this move and the company hasn't made any serious effort to reinvest it in growth to date.

Have you read the biography? If you did, you'd know that Steve did not always know what was best for Apple. For all his good points, he had more than his share of eccentricities. Hoarding cash was one of them. It wasn't a good business practice just because Steve did it.

I salute Tim Cook for leading the board on this decision, one they obviously could not make when Steve was with us. Cook is running the show now. He'll probably be a more conventional CEO than Steve, and at this stage of the game for Apple, that's a good thing.

I know this sounds exhaustive, but in the whole scheme of things Investors know ZERO about how to use Apple's money, Apple since 1997 made investors money after money. They should just be happy with the success and learn to invest what's been given to them by the company.

Two questions.
Who owns the company?
What is shark leeching?

Shareholders have a financial stack in the company, so what? Jobs didn't care. Though Cook does, again I understand because Cook is a bean counter not a product guy.

The leeches/Sharks are shareholders. They just want to milk whatever they can out of Apple, its the truth. Cooked caved to the pressure. Jobs was never so easily swayed.

Wait, what? The investors OWN the company, not the management. They should get a return of excess cash if Apple doesn't plan on using it in the future. Unbelievable.



More importantly, how does this PREVENT them from innovating a focus on products? Oh yeah, it doesn't.

Apple never said they didn't plan on using it, to my recollection. Apple has made great investments and returns for the Investors (aka sharks/leeches).

Cook focusing His attention on this junk instead of focusing on the details of Apples next products, in a way prevents the Focus that Jobs instilled in the company. Cook should be trying to become a product guy. Its something he really lacks, Steves Vision needs to be carried out, not hindered or altered just to appease some greedy shareholders.

 

[an-other]

4 Quick Points

1. A dividend dilutes the stock price (e.g. a $10 stock issuing a $2 dividend has a share price of $8 on ex dividend date.)

2. If you're a long term taxable investor, a dividend is contrary to your objective (arguably.) Why do I want to pay tax each year on income instead of building the capital gain (which is taxed at a lower rate.) The other aspect is you may redeem your shares after retirement when you have lower income.

3. One person wrote about how this is beneficial for his IRA (tax deferred retirement account.) He's absolutely correct. No need to redeem shares. Minimises risk as he has capital returned. Most savings for Americans are in retirement accounts.

4. I think there's some underestimation about how hard it is to invest that amount of cash.

(nothing I wrote should be interepreted as guidance or advice.)

 

[milo]

The stock price is in no danger of going down to the point where millions are losing money, nor could they have done anything to catapult the price to 4 figures in a week. It's going to fluctuate but go up overall like their prices always do.

Well...yeah. Not sure what that had to do with my post.

Uh, they are only using a fraction of their cash for the dividend payouts and share buyback program.

Yep, perfectly aware of all that, I just think that Apple could have found a better use for that $45 billion (edit, was million).

 

[SteveJobsUK]

Some people would be quite happy these days if their stock made 2% per year. But you're complaining that they're giving out nearly 2% per year and you don't even have to sell the stock? Glad you're not my broker or analyst. Why don't you go look at what a CD is paying right now.

Some savings accounts in the UK are paying at least 4% and you can easily get an better income with other stocks however overall Apple will probably earn you the highest amount.

 

[notanalien]

I can get today between 3% and 5% interest on savings accounts in the UK. The rate depends on whether you want instant access or are willing to lock the cash away for a fixed period.

Have a look at this if you don't believe me.... http://www.moneysavingexpert.com/savings/savings-accounts-best-interest#fixed

Maybe in the UK. Here in the US I haven't seen anything over 1% in years. I'd love to see that, so someone please prove me wrong!

 

[SteveJobsUK]

Well yes, but their arguments for a tax holiday are ridiculous, and should absolutely not be heeded (and I'm far from being a US taxpayer). If they choose to hoard their cash abroad: fine. However it should not escape taxation.

And I don't think a tax holiday, which is a form of government subsidy, has much to do with capitalism.

Why should they lose 30% of the money they've earned elsewhere if they just want to move it into the US and spend it there instead of overseas. Surely thats backwards?

 

[cvaldes]

Yep, perfectly aware of all that, I just think that Apple could have found a better use for that $45 million.

It's $45 billion, not million.

Clearly, Apple did not find a better use for that $45B. After all, they are accumulating cash faster than they are spending it.

The conference call notes indicate that Apple is activately monitoring this dividend and share buyback program and they can make adjustments in the future.

 

[SteveJobsUK]

To earn minimum wage from the AAPL dividends you'd need to own $1,000,000 worth of shares! Incredible.

 

[Dave00]

I'm not sure if my maths are correct but...

If I invest $60,000 in Apple stock at $600 a share that gets me 100 shares.

$2.65 per quater dividend equals $10.60 per year per share.

Multiply that by 100 and I would get $1060 in dividends per year.

If I just put the cash in the bank instead at 3% interest I would get $1800.

So I would still need the share price to rise steadily to really make any money on Apple stock.

(1) What bank are you finding that gives 3% interest? No major banks are giving even 1% interest.
(2) In your last line, you get the actual point. Have you not noticed what has happened to AAPL's stock price just this year? Price of the stock will only rise with increasing profits and stock buybacks.

 

[GfPQqmcRKUvP]

I know this sounds exhaustive, but in the whole scheme of things Investors know ZERO about how to use Apple's money, Apple since 1997 made investors money after money. They should just be happy with the success and learn to invest what's been given to them by the company.

Apple has too much cash that they aren't using. What don't you get about that? They aren't using it! The whole market functions with the implicit assumption that stockholders will get cold hard cash at some future point in time. Why not move that to now if they can afford to do it? They have $100 billion and spinning off so much cash every quarter it's ridiculous.

Shareholders have a financial stack in the company, so what? Jobs didn't care. Though Cook does, again I understand because Cook is a bean counter not a product guy.

Please tell me how this dividend will have any impact on products. Go ahead. If you respond to one comment in my post, please let it be this one.

Apple never said they didn't plan on using it, to my recollection. Apple has made great investments and returns for the Investors (aka sharks/leeches).

And yet they still have $100 billion and growing despite these investments. There's no way this dividend will prevent them from accomplishing their strategic objectives.

 

[cvaldes]

(1) What bank are you finding that gives 3% interest? No major banks are giving even 1% interest.

There are lots of banks giving over 1% interest. They just aren't located in the United States.

Interest rates vary by region.

Shaun, UK lives in a country where interest rates are 1-3%, even more.

 

[SteveJobsUK]

I'm not an expert on this but as far as I know interest on savings and dividends are treated as income by the UK tax authorities. Add in your salary to get your total income. Deduct your personal allowance (how much you can earn before you start paying tax) and the rest is taxable at 20% on so much and then 40% or 50% on the remainder.

Capital gains are treated differently. You pay either 18% or 28% depending on whether you are a low or high rate tax payer.

Tax on Dividends and Interest is deducted at source. So 10% (or higher depending on income) is taken off the dividends and 20% off the interest (i think). These are added back on to calculate the overall but you won't have any extra to pay if you are a lower rate earner. I believe you only get taxed in the US though if you US shares (like AAPL). Do not quote me on this!


(not investment advice, all opinion.)

 

[GfPQqmcRKUvP]

There are lots of banks giving over 1% interest. They just aren't located in the United States.

Interest rates vary by region.

Shaun, UK lives in a country where interest rates are 1-3%, even more.

Inter-country differences should be arbitraged away to the best of my knowledge.