2%-3% dividend suggested as best use of Apple's $100B in cash

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Comments

  • anantksundaramanantksundaram Posts: 16,993member
    Quote:
    Originally Posted by geoffrobinson View Post


    Remember, holding stock doesn't make money without a dividend. You would have to sell.



    Absolutely not true. You can write options.



    As an example example, if you own 1000 shares of Apple and you sold a July 2012 call at an exercise price of, say, $600 per share, you'd make $6.60*1000 = $6,600 today. (Options price from www.finance.yahoo.com) And hold on to your AAPL.



    I am not at all suggesting that you should do that, but your statement above is incorrect.
  • sacto joesacto joe Posts: 604member
    I'm inclined to agree with those who say that Apple's focus shouldn't be to maximize shareholder value. We're along for the ride. We paid for that privilege, but we did so for the chance to be rewarded by an increasing stock price, nothing more.



    The question Apple's board is clearly struggling with is, what is the best way we can use our cash to serve our focus? The answer is tied up in the question, what is or should be Apple's focus? Again, the answer is clear: Customer satisfaction.



    So maybe the best thing they can do with the extra money is lower the price of their product. Only one problem: They can't keep up demand as it is! Therefore, the best use of the extra cash is to vastly increase production so that they can lower the price, and increase the number of stores so they can improve service. Oh, and keep improving the quality of their product.



    Hmm. They're already doing all of these things, and they STILL are generating annoyingly large quantities of spare cash.



    Maybe they should become a bank. Or a charity. Or a foundation.



    You know what? I'm fine with all those. But as a stockholder, I see absolutely no need for a dividend.
  • syracusesyracuse Posts: 73member
    Quote:
    Originally Posted by Sacto Joe View Post


    I'm inclined to agree with those who say that Apple's focus shouldn't be to maximize sharholder value. We're along for the ride. We paid for that privilege, but we did so for the chance to be rewarded by an increasing stock price, nothing more.



    The question Apple's board is clearly struggling with is, what is the best way we can use our cash to serve our focus? The answer is tied up in the question, what is or should be Apple's focus? Again, the answer is clear: Customer satisfaction.



    So maybe the best thing they can do with the extra money is lower the price of their product. Only one problem: They can't keep up demand as it is! Therefore, the best use of the extra cash is to vastly increase production so that they can lower the price, and increase the number of stores so they can improve service. Oh, and keep improving the quality of their product.



    Hmm. They're already doing all of these things, and they STILL are generating annoyingly large quantities of spare cash.



    Maybe they should become a bank. Or a charity. Or a foundation.



    You know what? I'm fine with all those. But as a stockholder, I see absolutely no need for a dividend.



    annoyingly large quantities of cash?



    charity?



    foundation?



    What planet are you from?
  • sacto joesacto joe Posts: 604member
    Quote:
    Originally Posted by syracuse View Post


    annoying large quantity of cash?



    charity?



    foundation?



    What planet are you from?



    Give in order to receive. What a concept. Insane, or insanely great?
  • markdavidnoblemarkdavidnoble Posts: 2member
    I thought that the whole purpose for dividend creation was to stimulate interest in a particular stock?s ownership. What better barometer do we need than the already sky high price and growth curve of Apple stock? Why not continue to hold solid cash reserves and invest surpluses in R&D projects.



    Dividends may lure a few more investors, but well chosen and funded R&D projects create long term value and viability. Yes, dividend creation can fund corporate capital through stock price increases, but stock prices are really just bets on future demand. Stock prices may wax and wane throughout a corporation?s lifespan. Cash, patent holdings, and product R&D (past, present and future) are the real armor that a company needs to thrive.



    Corporate warfare is just like any other kind of warfare, where the supply sergeant needs quick and uninterrupted access to supplies. Effective military logistics demand a quick response to the needs of the front line. Cash supports logistics like nothing else.



    Traditional cash bloat vulnerabilities are not a current problem for Apple. And cash poor ?innovation? companies will almost always become new meat for the giants and find their patents working to fund someone else?s dreams.



    http://markdavidnoble.com
  • sacto joesacto joe Posts: 604member
    Quote:
    Originally Posted by markdavidnoble View Post


    I thought that the whole purpose for dividend creation was to stimulate interest in a particular stock?s ownership. What better barometer do we need than the already sky high price and growth curve of Apple stock? Why not continue to hold solid cash reserves and invest surpluses in R&D projects.



    Dividends may lure a few more investors, but well chosen and funded R&D projects create long term value and viability. Yes, dividend creation can fund corporate capital through stock price increases, but stock prices are really just bets on future demand. Stock prices may wax and wane throughout a corporation?s lifespan. Cash, patent holdings, and product R&D (past, present and future) are the real armor that a company needs to thrive.



    Corporate warfare is just like any other kind of warfare, where the supply sergeant needs quick and uninterrupted access to supplies. Effective military logistics demand a quick response to the needs of the front line. Cash supports logistics like nothing else.



    Traditional cash bloat vulnerabilities are not a current problem for Apple. And cash poor ?innovation? companies will almost always become new meat for the giants and find their patents working to fund someone else?s dreams.



    http://markdavidnoble.com



    That strikes me as being dead on target. I just read a piece about how Napoleon lost when he tried to invade Russia. It all boiled down to the logistics of supplying a huge invading force. Apple is leading a charge against many entrenched competitors. Above all, it needs to protect and bolster its supply chain.



    Really good point.
  • pixelinopixelino Posts: 1member
    Most of the cash is in offshore accounts (around 60% if I remember). Wouldn't Apple need to repatriate those funds first and pay taxes on it? Sorry for my faulty memory, but I think that would mean around 35% would just be taken away from the get go.



    Seems like dividends are a bad financial strategy for both Apple customers and shareholders.
  • syracusesyracuse Posts: 73member
    Quote:
    Originally Posted by Sacto Joe View Post


    Give in order to receive. What a concept. Insane, or insanely great?



    Apple GIVES the world insanely great products.



    They don't need to give away their hard earned "retained earnings"
  • sacto joesacto joe Posts: 604member
    Quote:
    Originally Posted by syracuse View Post


    Apple GIVES the world insanely great products.



    They don't need to give away their hard earned "retained earnings"



    I know this runs counter to the typical conservative mindset, but I'm only being halfway facetious. Elevating the customer also elevates the seller. Look at China: Apple's helping elevate them, and they're becoming Apple's customers. Focusing on the customer rather than on the stockholder is simply good business.
  • dasanman69dasanman69 Posts: 12,481member
    Quote:
    Originally Posted by Sacto Joe View Post


    I'm inclined to agree with those who say that Apple's focus shouldn't be to maximize shareholder value. We're along for the ride. We paid for that privilege, but we did so for the chance to be rewarded by an increasing stock price, nothing more.



    The question Apple's board is clearly struggling with is, what is the best way we can use our cash to serve our focus? The answer is tied up in the question, what is or should be Apple's focus? Again, the answer is clear: Customer satisfaction.



    So maybe the best thing they can do with the extra money is lower the price of their product. Only one problem: They can't keep up demand as it is! Therefore, the best use of the extra cash is to vastly increase production so that they can lower the price, and increase the number of stores so they can improve service. Oh, and keep improving the quality of their product.



    Hmm. They're already doing all of these things, and they STILL are generating annoyingly large quantities of spare cash.



    Maybe they should become a bank. Or a charity. Or a foundation.



    You know what? I'm fine with all those. But as a stockholder, I see absolutely no need for a dividend.



    Increasing production and/or adding stores can come back to bite you in the ass. Just look at how many retailers overexpanded and then had to close stores. Its always better to fill demand than to anticipate it incorrectly and end up with your product collecting dust. A small one time dividend won't hurt and drive up stock price. A win for both income and growth investors.
  • syracusesyracuse Posts: 73member
    Quote:
    Originally Posted by Pixelino View Post


    Most of the cash is in offshore accounts (around 60% if I remember). Wouldn't Apple need to repatriate those funds first and pay taxes on it? Sorry for my faulty memory, but I think that would mean around 35% would just be taken away from the get go.



    Seems like dividends are a bad financial strategy for both Apple customers and shareholders.



    Apple could use the retained earnings generated out of the US and pay a hefty dividend.

    With ZERO tax implications.

    And have plenty of cash left over to sit in money market accounts.
  • sacto joesacto joe Posts: 604member
    Quote:
    Originally Posted by dasanman69 View Post


    Increasing production and/or adding stores can come back to bite you in the ass. Just look at how many retailers overexpanded and then had to close stores. Its always better to fill demand than to anticipate it incorrectly and end up with your product collecting dust. A small one time dividend won't hurt and drive up stock price. A win for both income and growth investors.



    What have they got to lose? They've got money to burn! Besides, we don't need a piddly little dividend. Apple went up well over 40% in the last year. Who cares about another lousy 2%, which will be less than that after taxes.
  • flaneurflaneur Posts: 3,890member
    Quote:
    Originally Posted by Red Oak View Post


    . . . Above all, Apple senior management needs to make sure they have the capital to execute their game plan. It's worldwide and it is on a massive scale, as they are essentially building out the world's computing and mobile platforms for the next 20 years. Only they really know the plan and the need for the cash



    This is the way to think about this! Even five years out, nobody knows what they have in the works.



    Jragosta is also among the few who acknowledge the unknown need for cash in the future.



    Data centers around the world, new screen technologies, wearable displays, 3D and lightfield imaging, who knows what else . . .



    They certainly have not finished revolutionizing photography, either in display or acqusition, just to take one example. Right now there is a desperate need for mid-level 3D video cameras. There is absolutely nothing decent on the market. Same with wearable screens. The Sony wearable screen is, well, very un-Apple.



    http://store.sony.com/webapp/wcs/sto...rtNumber=HMZT1



    Anyway, I can see them burning through a few tens of billions on their next few computing revolutions.
  • sacto joesacto joe Posts: 604member
    Quote:
    Originally Posted by Sacto Joe View Post


    What have they got to lose? They've got money to burn! Besides, we don't need a piddly little dividend. Apple went up well over 40% in the last year. Who cares about another lousy 2%, which will be less than that after taxes.



    I might also add that by Tim Cook's own admission they left money on the table this holiday season by underestimating demand. If anything, the record speaks of Apple being overly cautious about investing. That needs to stop.
  • gprovidagprovida Posts: 212member
    If you go to Horace's site, asymco.com, you discover Apple Stock price is highly correlated with its cash not its current or future earnings. Ergo if you give back a lot of cash $50B of $100B you may well drop the stock to $250 from $500. So for $50B you put $250B in stock value at risk.



    When stockholders value Apple's profits now and in the future P/E of more like 15-20 vs the current miserable 10-15 over the last year or so, then consider dividend that seriously eats into the cash.
  • syracusesyracuse Posts: 73member
    Quote:
    Originally Posted by Flaneur View Post


    This is the way to think about this! Even five years out, nobody knows what they have in the works.



    Jragosta is also among the few who acknowledge the unknown need for cash in the future.



    Data centers around the world, new screen technologies, wearable displays, 3D and lightfield imaging, who knows what else . . .



    They certainly have not finished revolutionizing photography, either in display or acqusition, just to take one example. Right now there is a desperate need for mid-level 3D video cameras. There is absolutely nothing decent on the market. Same with wearable screens. The Sony wearable screen is, well, very un-Apple.



    http://store.sony.com/webapp/wcs/sto...rtNumber=HMZT1



    Anyway, I can see them burning through a few tens of billions on their next few computing revolutions.



    I hope Apple spends tens of billions on the next computing revolution. That would still leave a growing pile of cash earning money market rates.
  • jragostajragosta Posts: 10,473member
    Quote:
    Originally Posted by syracuse View Post


    jrag,

    So if AAPL's Board had bought back any amount of shares last year as opposed to investing in money market securities at .25% that would not have been a good use of capital?



    The Board obviously doesn't think so.



    You know, the people were elected by shareholders to direct the company. The people who have access to all of Apple's plans. The people who have a legal fiduciary responsibility to plan for Apple's future.



    Why should anyone accept your view over theirs?
  • friedlobsterfriedlobster Posts: 386member
    Quote:
    Originally Posted by herbapou View Post


    Market Cap says we need a dividend. Apple could make all the growth in the world, who is going to buy the stock? Everyone that can already owns it at max level...



    Retail investors are a drop in the sea, you could have all the retail investors sell the stock at the same time and the price will barely move. And if Apple slow its growth, the hedge funds are going to start dumping it and the stock will tank to insane low level compare to fundamentals. You could have Apple trading at a P/E of only 5 if this happen. Again, finance 101, the price of a stock is base on profit participation at some point. The only thing keeping a no dividend growth stock price is... growth.



    If you want to see what happens to a growth stock that doesnt pay dividends when investors realize the company wont be able to deliver the growth: go see the netflix chart. And look at amazon, they are going down like a patato bag if they miss again.



    They need new money coming in from big funds that cant touch it right now.





    Absolute non sense. You dont know what you're talking about.



    Youre comparing netflix and amazon to Apple? Haha youre nutz!



    Look at their revenue/profit/etc growth. THERE is no comparison.



    Do you even know what youre talking about? Rofl
  • mikeb85mikeb85 Posts: 506member
    A stock market without dividends is essentially a ponzi scheme. The only way you make money is by selling to the next guy. Eventually, there will be a guy taking a loss at the end. And from the sound of it, a lot of you guys will be that guy. A dividend will drive the price up near term, and stabilize it, so you can retire with your shares, make extra income, and not worry.



    You guys talk about growth stocks, Apple's share price is growing very slowly right now. I've got stocks that have doubled up in the last 6 months, I'm up 20 percent in the last week. But I'm a trader. I'll buy and sell a hundred times in a month if I want.



    If you guys want to hold on to Apple stock, you want a dividend. The current Apple share price increase is because of dividend rumors. Without a dividend, the stock price could crash anytime. Share price is at an all time high, you think the hedge funds won't take profit? And they move markets, not you guys (or me for that matter).
  • mcrcnmcrcn Posts: 27member
    Nothing like Apple receiving unsolicited advice from someone on Wall Street. Of course they want access to Apple's cash. If you want a dividend stock by Intel, Microsoft or a utility company. Besides why should Apple pay Uncle Barrack 35% in taxes on the cash needed to pay the dividend that is actually held overseas. It would be just throwing good money away at this point.
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