Apple may offer stock buyback or increased dividends this Spring, report says
With its cash pile growing and stock performance slumping, a report claims that Apple will initiate a share buyback program or issue increased dividends in an effort to mete out value to its investors.
Source: Quartz
Citing sources close to the issue, Quartz reported on Tuesday that Apple is looking to return some of its $137 billion cash hoard to AAPL investors, with the preferred method expected to be additional dividends or share buybacks.
Apple has seen increased pressure of late to make some sort of move with its massive holdings, the most publicized being David Einhorn's lawsuit against the company in hopes of garnering perpetual preferred stock. Despite Apple CEO Tim Cook's quip that the suit was a "silly sideshow," sources said the tech giant found the so-called "iPref" idea "interesting." The company has also reportedly hired Goldman Sachs to aid in assessing its options.
The publication claims Apple could announce the initiative alongside a product unveiling this Spring. Previous reports have predicted that the company will indeed announce plans for its growing cash pile soon, as investors have become skittish on the stock's recent market performance.
Since reaching a high of over $700 in September, shares of AAPL have fallen nearly 40 percent and closed trading on Tuesday at $428.43, down $9.44 or 2.16 percent.
Source: Quartz
Citing sources close to the issue, Quartz reported on Tuesday that Apple is looking to return some of its $137 billion cash hoard to AAPL investors, with the preferred method expected to be additional dividends or share buybacks.
Apple has seen increased pressure of late to make some sort of move with its massive holdings, the most publicized being David Einhorn's lawsuit against the company in hopes of garnering perpetual preferred stock. Despite Apple CEO Tim Cook's quip that the suit was a "silly sideshow," sources said the tech giant found the so-called "iPref" idea "interesting." The company has also reportedly hired Goldman Sachs to aid in assessing its options.
The publication claims Apple could announce the initiative alongside a product unveiling this Spring. Previous reports have predicted that the company will indeed announce plans for its growing cash pile soon, as investors have become skittish on the stock's recent market performance.
Since reaching a high of over $700 in September, shares of AAPL have fallen nearly 40 percent and closed trading on Tuesday at $428.43, down $9.44 or 2.16 percent.
Comments
ZZzzzzzzZZzzzz.
So the prospect of a stock buyback is probable.
Not only that. The report was based on information from SOURCES CLOSE TO THE ISSUE.
Magic preferred shares.
Quote:
Originally Posted by jfc1138
Stock buybacks were said at the financial call to be the reason they didn't state a future eps. Since the buyback would be changing the number of shares.
Really? By whom? When during the call? Care to provide a cite from a transcript?
Pippen was pretty boring to watch without MJ...Same and Cook AND Jony without SJ...they are getting their asses kick by the boys of Wall St. (Who do matter bu the way:-)
"Apple may offer stock buyback or increased dividends this Spring"
... or maybe NOT.
Quote:
Originally Posted by msuberly
So the preferred method of returning cash to shareholders is a stock buy back or increased dividend. What other way is there for a corporation to give money to shareholders????
Those are the only ways.
Quote:
Originally Posted by jfc1138
Stock buybacks were said at the financial call to be the reason they didn't state a future eps. Since the buyback would be changing the number of shares.
So the prospect of a stock buyback is probable.
Aren't they able to hold them to fulfill future employee stock options or am I missing something?
Those are the only ways to give money to shareholders.
However, there is also the concept of adding value - which doesn't have to involve a direct transfer of money. Apple has done an incredible job of increasing the value of its shares for the last decade and a half - which clearly benefits shareholders. In fact. the benefit from increased share price dwarfs the amount paid out in dividends.
If you're only interested in cash returns, buy Savings Bonds. If you're interested in value creation, dividends aren't really the best way to do it.
Reinvest the dividends. If the stock falls or trades flat over time, your share count (and future dividends) will compound. If the stock rises, you compound less.
Apple sold the shares decades ago. In order to pay them to employees as compensation, Apple has to buy them from somewhere or create more through a secondary offering.
Creating new shares simply dilutes the value of all shares. Buying them back just to give to an employee does not hurt current shareholders, but does not help them any. Only buying them back and canceling those shares has an effect, albeit indirect, on the value of current shares.
Quote:
Originally Posted by jragosta
Those are the only ways to give money to shareholders.
However, there is also the concept of adding value - which doesn't have to involve a direct transfer of money. Apple has done an incredible job of increasing the value of its shares for the last decade and a half - which clearly benefits shareholders. In fact. the benefit from increased share price dwarfs the amount paid out in dividends.
If you're only interested in cash returns, buy Savings Bonds. If you're interested in value creation, dividends aren't really the best way to do it.
The problem with 'adding value' is that once stocks get to a certain market cap, they max out if you will. At which point investors only care about cash (ie. buybacks and dividends).
Why buy into a 400 billion dollar company expecting it to go to what, 500 billion? When you can invest in a 5 billion dollar company which will have a much easier time achieving a 20 billion dollar market cap.
This is the real issue with Apple's stock. They've reached a point where exponential growth is difficult, but also where their already high market cap makes it more difficult for investors to achieve gains on the stock price. 400 billion to 500 billion is a 25% gain, whereas you buy into a company with a smaller market cap and an increase in value of 5 billion can mean doubling up.
This is all nonsense. There's no intrinsic reason why the market cap must max out nor is there any reason that the value can't continue to increase.
In fact, Apple continues to increase their value. Profits are still growing. Sales are still growing. While Wall Street's estimate of the value (market cap) has declined, the value of the company is clearly still going up.
It's true that percentage gains will be smaller for a large company, but so are the risks.