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

[Rocketman]

LBO - Go private

AAPL

Shares Outstanding 929.00 Mil
Institutional Ownership (%)68.74
Top 10 Institutions (%)25.50
Mutual Fund Ownership (%)1.465%
Insider Ownership (%).83
Float (%)99.17

Cost of going private:

Contract with institutional owners for 69% of stock and 1% of treasury stock.

Remainder of the float or outstanding stock would have to opt in or be bought out at market.

30% 0f 929 Million shares at today's market price of $388.50 is $108,274.95 millions or about $108.3B of the company value. Apple could do a leveraged buyout with a brokerage account margin loan against $20B in stock and $20B in cash (which can reside in any country), and get a margin loan for $110B and not even use a LBO company and the associated fees at all.

Apple would then be entirely private and not subject to public disclosures going forward.

Based on cash flow and using funds folks speculate as set aside for dividends to pay the loan off, assuming a 3% quarterly dividend (12% annual) pay rate. 929M shares @ $388.50 @ 3% is $10.83B per quarter or pay off the loan with interest in about 11.1 quarters or under 3 years.

Hey guys, call me.

Rocketman

. . . Yes I realize folks are suggesting a 3% annual dividend, but that is money out the door with no benefit to corporate purposes.

 

[applesith]

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.

Spending money you do or do not have is not very difficult. I guess you are right, they have sooooo much cash that even if they bought everything it would still be too much. There is not a single company out there that they could buy.

Cash is not hurting shareholder value.

 

[50548]

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.

You seem to be the only one here not understanding finance, probably because 1) you don't have an economics degree; 2) you are putting your desire for quick money before Apple's corporate interests; and 3) you have no idea about Apple's standard practice towards organic acquisitions; and 4) you probably don't know either about the massive European crisis that may blow up in everyone's faces.

So please take a deep breath, read some more and then come back before trying to lecture people on something you don't know.

A dividend has absolutely no reason to be in Apple's current situation, where growth possibilities are still extremely high in different market segments, and where the DNA of innovation constitutes the company's very core, as opposed to "saturates" stocks such as MS, Nestlé or General Electric.

As for those complaining about the P/E ratio, this has absolutely no bearing on the valuation of a company per se, unless Apple has given up on its R&D potential for the long haul and needs an artificial "shot in the arm" to prop stock up for the next 2 months - a ridiculous idea, of course.

Another big downside as I explained before: the payment of dividends will lead to moral hazard where, from then on, Apple's valuation will include an automatic expectation for recurring dividend distribution, which will totally change the investment profile from "I believe in the company's future" to "I want my cash every quarter".

You want to make the stock more attractive and liquid for small investors? Do a 4x1 split - simple as that. Any dividend distribution will dillute Apple's cash position in the long term, lead to the payment of taxes instead of organic acquisitions and create a brand new moral hazard drug for investors. And NONE of that is positive for the company.

The rest of the "expert" opinions here is fluff and chaff from people not interested in Apple's future.

 

[lcm123]

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.

Why do people assume that the rich people are the only Apple shareholders. There are a lot of regular individual investors out there who makes average income, and let's not forget there are a lot of average Apple employees who own some shares of the stocks.

 

[ronjon10]

Funny discussion. This will have zero impact on the way Apple operates moving forward. They'll have enough money to buy companies, build buildings, buy patents to their hearts desire.

You can bet everything you have that as long as Apple keeps generating great products, it'll continue to generate massive profits which will drive stock growth and dividend increases.

You can also bet everything you have that if Apple ceases creating innovative products and starts making minor incremental improvements to it's existing products, people will upgrade less often and the stock price will level as it has with MSFT, ORCL, INTC, CSCO etc. (Frankly, it's inevitable at some point).

None of this has anything to do with dividends.

Some investors will bail because they don't like dividends, other investors will hop on board because they do like dividends.

 

[Ryth]

I'd rather see them do a stock split for obvious reasons...but I'll take a dividend.

 

[cameronjpu]

You seem to be the only one here not understanding finance, probably because 1) you don't have an economics degree; 2) you are putting your desire for quick money before Apple's corporate interests; and 3) you have no idea about Apple's standard practice towards organic acquisitions; and 4) you probably don't know either about the massive European crisis that may blow up in everyone's faces.

Actually I do have an economics degree from a top 3 college in the USA. I also co-founded the investment club on campus there.

The rest of your post is a waste of time. Good luck, lawyer.

 

[herbapou]

I'd rather see them do a stock split for obvious reasons...but I'll take a dividend.

They could do both and still continue stacking billions... That fact is the stock price and market cap DOES hold the stock back. Apple is trading at an insanely low P/E compare to lets say Amazon which is trading at 100 P/E. I would do a 1/10 split and start paying a dividend.

Don’t make the mistake of comparing AAPL to MS. MS had 95% market share when it started paying dividends. Of course they didn’t growth…

Apple has small market shares in some markets and is in markets that are growing so much that even keeping the same market share means growth. Apple stock stop increasing on the perception that the company is already so big it can’t possibly growth more. Splitting the stocks will help improved “perception” and paying a dividend will allow fund managers to start buying AAPL on there revenue funds, increasing the price.

If nothing is done the stock is only going to rise on earnings (when they are good).

 

[Rocketman]

Actually I do have an economics degree from a top 3 college in the USA. I also co-founded the investment club on campus there. The rest of your post is a waste of time. Good luck, lawyer.

Economists don't seem to understand politicians who don't understand financiers who don't understand lawyers. They each have very different agendas, language, and motives.

As an degreed economist who has had to use lawyers (who are all evil) and financiers (who are all transaction focused) and politicians (who are always acting counter to constituent interest) it seems to me only economists are aware of and care about, not only the individual, but the firm, the society, and the world. They simply cannot agree on methods sufficient to get the attention of any of those other groups, who happen to be in charge of the centers of power in this world.

Rocketman

 

[tido2012]

Offering a dividend may increase the price in the short term, but I'm not sure that your reasoning on the value in the long run is correct. I would rather they use the money to make acquisitions in order to help the company grow and continue to make great products. I hope this is just another analyst trying to fill a 30 minute segment somewhere.

Offering a dividend will do nothing but help bring the stock price up.
Which in turn would make the company more valuable in the long run.

 

[GfPQqmcRKUvP]

You seem to be the only one here not understanding finance, probably because 1) you don't have an economics degree; 2) you are putting your desire for quick money before Apple's corporate interests; and 3) you have no idea about Apple's standard practice towards organic acquisitions; and 4) you probably don't know either about the massive European crisis that may blow up in everyone's faces.

Your post is absolutely irrelevant when considering the cash Apple has and is spinning off every single quarter. You understand that if you buy a share of Apple stock you're buying a great tech company and then the largest non-government stockpile of cash in the world? Using cash to buy cash is useless unless that cash is required for operations and/or expansion. I have a hard time believing that Apple couldn't achieve its strategic objectives with paying a 3% dividend that wouldn't even touch the money it has in the bank. I'm fully supportive of Apple having a lot of cash for future acquistions, but it's getting a bit ridiculous at this point.

You want to make the stock more attractive and liquid for small investors? Do a 4x1 split - simple as that.

Sure, slightly more liquidity. You know what would also make it more liquid AND give money back to the owners of the company? A dividend.


EVERYONE NEEDS TO READ THE FOLLOWING QUOTE. IT IS THE BASIS UPON WHICH THE WORLD OF FINANCE AND BUSINESS RESTS.

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.

 

[50548]

Well, the post above shows exactly why the US economy is in such dire straits...people just advocate whatever is best for their short-term interests, without ANY knowledge of the fundamentals behind a concept such as the stock market.

Apple is a PUBLICLY-LISTED company which has based its growth over the last 15 years on innovation, marketing prowess and tight supply-chain management. In the case of Apple, a stock has value BECAUSE of its potential to out-grow and out-innovate competitors, as has been the case since SJ's return. Do you want to "claim" your money back? Sell your stock and benefit from a 1000%+ return since 2000...after all, this is what investments are for - you become part-owner of a company because you believe in its ability to provide returns in the medium term thanks to its ability to innovate and create new demand.

Do you want a quick buck? Buy GE for 2 today and expect a .25 dividend tomorrow. If you think of Apple as just another open company, you've already lost track of why it is the largest tech company in the world today...dividends will ONLY create moral hazard for the coming years, nothing else...if you know what moral hazard means, of course.

 

[Rocketman]

Right now cash is king because liquidity is not. Maybe if liquidity improves across all sectors I might go along with a cash usage suggestion. In the mean time Apple actually uses the cash it has now as collateral for the large scale things it does to "employ" capital. It finances suppliers forward. It finances inventory forward. It buys facilities in cash. It makes strategic acquisitions. It has a cash balance, but that allows it to use "capital" to do those things that otherwise would make their cash balance decline. That is power. Big time!

A stock split would make the stock more accessible to the regular investor and about 30% of Apple stock is not owned by institutional investors. The rule of thumb is $40-100 per share price so it would actually require an 8:1 stock split at this point if that were in the cards. The current price further encourages institutional investing to become more prevalent. If Apple has a go private strategy that might be one goal.

But I wonder why there is so much emphasis on "finance" on an Apple rumor site. Are there a bunch of investors here already?

Rocketman

 

[TallManNY]

Hmm, so what"s in it for Apple?

I understand if they want to issue new stocks that they might have a better chance of selling them if these stocks pay dividends.

But Apple does not need to issue any more stocks.
They don't need any more money.

So why would they even think of paying dividends?
What's in it for Apple if they are considered a 'higher value' stock?

Unless they intend to release new stocks, I do not really understand why they would do it...
Explanations welcome.

Uggh! What is in it for Apple? That is completely the wrong question. The Shareholders OWN the company. This puts cash in the Shareholders pockets. You should be asking what is in it for the Shareholders and the answer should be darn obvious.

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Well, the post above shows exactly why the US economy is in such dire straits...people just advocate whatever is best for their short-term interests, without ANY knowledge of the fundamentals behind a concept such as the stock market.

I completely disagree with you and a number of your other posts in the thread. I strongly suspect that you are having a hard time putting your arms around the magnitude of having $80 billion in cash in the bank with another $1 billion coming in every month.

If paying a small dividend limited what Apple could do in terms of innovation, then yes, I agree, don't do it. But it won't limit their innovation. Apple has lots of plans to innovate, but the fact is that their innovation has never cost anywhere close to multiple billions. Do you think designing the iPhone cost $10 billion? Innovation isn't just something you can buy. There are only so many programmers and engineers to hire. There are only so many interesting companies to acquire that are actually useful to Apple. So it isn't like if Apple pays out a $5 billion dividend that Apple will lose out on $5 billion in innovation.

Actually the fear that a lot of investors have is that the cash pile will grow so large that Apple will spend it on something foolish that is out of their area of expertise (like buying MySpace or Yahoo or Groupon or T-Mobile). I'd rather Apple keep themselves a little leaner and maybe that will keep them a little hungrier to perform. I don't want to see Apple with a $100 billion cash position next year. That would just be silly.

 

[TallManNY]

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.

Better "invested" elsewhere? Where? Right now that money is probably in U.S. Treasuries earning 2%. That is the investment. Do you want Apple to start buying far less valuable and profitable companies? Do you know what that does, that means giving money to non-Apple shareholders. Do you think that will be in the best interest of Shareholders?

Dividends are not a cheap trick, they are the entire point of being a Shareholder. A mature and profitable company is supposed to make money for its Shareholders. It does that by paying dividends to its Shareholders.

 

[Rocketman]

The Shareholders OWN the company. This puts cash in the Shareholders pockets. You should be asking what is in it for the Shareholders and the answer should be darn obvious.

Good point! Finally a voice of reason in this thread. The thing that puts cash in shareholder's pockets several times the rate of dividends is capital appreciation. If one were to issue a 3% annual stock dividend it would retard the future stock price closer to the 3% expectation, and, the current capital appreciation without a dividend is several times that of any possible dividend.

2009 86.29
2010 214.38 +148%
2011 331.29 +54.5%
2012 395.60 +19.4%

Thank goodness for reason over some daily post!

Rocketman

 

[Diiiiips]

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



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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).

Why isn't a stock split more common? It seems to make logical sense for companies like Apple and Google so their stock is more accessible for the casual investor.

 

[TallManNY]

2009 86.29
2010 214.38 +148%
2011 331.29 +54.5%
2012 395.60 +19.4%

Thank goodness for reason over some daily post!

Rocketman

Hey, I like the appreciation as much as the next Shareholder. But Apple is going to make silly money this quarter from the 4S sales. I think the sky is the limit for smartphones because I think everyone on the planet is going to want one eventually. So with BILLIONS in profit coming into Apple every month, there does not seem to be any reason to just hold onto that money.

And, as someone pointed out, the IRS is eventually going to start taxing Apple as if that money had been paid as a dividend eventually anyway. So it is time to stop investing that money in U.S. treasuries and starting sending a small fraction of it to the people who actually own the company.

 

[TallManNY]

Why isn't a stock split more common? It seems to make logical sense for companies like Apple and Google so their stock is more accessible for the casual investor.

Casual investors have become irrelevant in the market as investors for whom $400 is a significant sum do not command enough capital to be meaningful. Most investment is by large funds or the rich (see the 1%). The middle class are becoming more and more irrelevant for purposes of the market.

 

[GfPQqmcRKUvP]

Well, the post above shows exactly why the US economy is in such dire straits...people just advocate whatever is best for their short-term interests, without ANY knowledge of the fundamentals behind a concept such as the stock market.

I'll let this slide and focus on your argument.

Apple is a PUBLICLY-LISTED company which has based its growth over the last 15 years on innovation, marketing prowess and tight supply-chain management. In the case of Apple, a stock has value BECAUSE of its potential to out-grow and out-innovate competitors, as has been the case since SJ's return.

Exactly. This has nothing to do with my point.

Do you want to "claim" your money back?

Umm...yes. I do. You know why? Because the money I want to claim back isn't doing anything for Apple or myself. It's sitting there doing nothing but I can't take some of it back because it's tied to the stock. Apple could be just as innovative with $50 billion in the bank instead of $80 billion. The only way the dividend could be argued as being damaging would be if paying a dividend reduced the amount they were willing to invest in growth.

Sell your stock and benefit from a 1000%+ return since 2000...after all, this is what investments are for - you become part-owner of a company because you believe in its ability to provide returns in the medium term thanks to its ability to innovate and create new demand.

Also irrelevant. Apple cash position is not helping the return or innovation. In fact, the return would be higher if a quarter of my equity investment didn't represent straight cash.

Do you want a quick buck? Buy GE for 2 today and expect a .25 dividend tomorrow. If you think of Apple as just another open company, you've already lost track of why it is the largest tech company in the world today...dividends will ONLY create moral hazard for the coming years, nothing else...if you know what moral hazard means, of course.

I don't think you know what moral hazard means. Look it up.

If one were to issue a 3% annual stock dividend it would retard the future stock price closer to the 3% expectation, and, the current capital appreciation without a dividend is several times that of any possible dividend.

The capital appreciation point would only be relevant if the choice was dividend OR reinvestment in the company's operations.

 

[FluJunkie]

A couple thoughts:

1. "What's in it for Apple?" is kind of a flawed question. Apple's stockholders are the ones who own Apple. So what's in it for them is a 3% dividend.

2. This doesn't necessarily signal that Apple doesn't think it's got any more good ideas. Just that those good ideas aren't going to require the entirety of Apple's *massive* cash reserve.

3. Share price helps speculators. Dividends benefit long-holding shareholders. For more than a decade, the only profit to be had in owning Apple...was to stop holding Apple. The idea that dividends are something only good for short term interest is silly.

 

[mccldwll]

I'm not sure you understand investing. The purpose of owning stocks has always been to participate in the profits of a company. If you own stock you own a piece of the company. Dividends are a way of returning part of a stock holders investment to them.

So yes, if you are a shareholder you can and hopefully will eventually make back your initial investment plus profits via dividends. That's the point.

Companies need long term investors in order to guarentee stability in their stock prices. Day traders live and die by volatility. Companies need stability and long-term investors do not invest without dividends.

We just sold all out AAPL stock. Made a nice profit. But you must realize that without a dividend you have no profit until you sell your stock. Don't believe me? Go ask all those "paper" dellionairs. When the dotcom bust came a lot of people who were very rich on paper suddenly found themselves in the poor house and in a lot of debt.

What a ridiculous collection of opinion. I'm not sure you understand investing if you think the goal is to make back your investment through dividends and that "long-term investors do not invest without dividends". I guess if Berkshire Hathaway ever decides to pay a dividend investors might want to own it and it might increase in value beyond it's measly sub $100,000 per share value.

 

[mccldwll]

The money belongs to the shareholders, not the corporate entity. Apple has no use for 80bn, hence they should pay dividends.

No clue how 3% became significant though.

No. The 80Bn belongs to the corporate entity, not the shareholders. The shareholders have fractional interests in the corporate entity.

 

[GfPQqmcRKUvP]

What a ridiculous collection of opinion.

That wasn't opinion, it was fact. Owning a stock is worthless without the promise of future cash flows from the business. That most people profit off selling the stock to another individual is merely an intermediate step before distribution of the business's accumulated wealth via dividends and/or eventual liquidation.

 

[mccldwll]

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



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LOL. Sure, what did you buy it at, 42?

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That wasn't opinion, it was fact. Owning a stock is worthless without the promise of future cash flows from the business. That most people profit off selling the stock to another individual is merely an intermediate step before distribution of the business's accumulated wealth via dividends and/or eventual liquidation.

Is that something you were taught in some biz 101 class? Future cash flow can be reflected much more appropriately through appreciation than dividends. Take a look at Berkshire, a non-dividend payer, trading at @85K per share last time I checked.