Moving the needle in the future will require huge investment. I think they should build up to 250 Billion before settling down and giving a larger percentage.
Can you give a little background on why you think huge investments will be required? What company besides Apple could amass that kind of cash stockpile even if given 10 years to do it? So only Apple will ever be able to move the needle because they're the only ones that could have such a war chest? You want Apple to have more in cash than the entire market capitalization of all but a couple of the biggest public companies in the world. To me there doesn't seem to be any rational argument to support that theory. I would be glad to hear one.
Fifth, the argument that a dividend would have a positive effect on the share price is nothing more than unfounded speculation. Compare Microsoft to Apple for the past 10 years. Microsoft offers a dividend, Apple does not. Or Dell. Or almost any other company. If an institutional investor is not happy with the returns that AAPL has generated over the past decade, a dividend won't change their mind.
Overall, it's a crazy idea. If they really want to use the money to shore up stock prices, a stock buyback makes infinitely more sense.
Law of large numbers is the problem. I think they should do both, a regular dividend on the common share to allow more funds to buy Apple and buybacks to artificially rise the stock prices. I dont like buybacks but since Apple has so much $ its not a big issue if they keep it under control.
I'll restate an idea I suggested from another thread:
Instead of a dividend, Apple should use this money to start a bank.
Seem crazy? Here's why I think it makes sense:
1. I hate my bank and every bank I've ever had. The website sucks and I fundamentally don't trust them. Who doesn't agree with that? Seems like a market ripe for disruption.
2. Banking isn't as far afield of Apple's business as it seems. On the consumer side, there's a massive number of financial transactions that are processed through Apple's various stores (online, retail, music, and apps). Instead of paying charges to credit card companies, Apple could grab those charges for itself. On the corporate side, Apple already pushes a fair bit of money into the supply chain -- why not start lending money to their suppliers? And of course banking is becoming increasingly electronic -- that ties in with iCloud and it ties in with using iDevices as a means of payment.
3. Obviously Apple has the cash and brand power to start a bank.
Fifth, the argument that a dividend would have a positive effect on the share price is nothing more than unfounded speculation. Compare Microsoft to Apple for the past 10 years. Microsoft offers a dividend, Apple does not. Or Dell. Or almost any other company. If an institutional investor is not happy with the returns that AAPL has generated over the past decade, a dividend won't change their mind.
You're 5th point doesn't seem like a rational argument to me.
Wouldn't it make much more sense to compare the price of any of the mentioned stocks against themselves from before they instituted a dividend and then afterward (maybe trailing and following 6 months/1 year)? Then you can see what offering a dividend did to that particular stock. If you do a broad enough survey you should be able to see a reliable pattern. Comparing those stocks relative to Apple is completely illogical when deciding if beginning to issue a dividend is beneficial for Apple.
It's possible that a company's stock price doesn't generally benefit from beginning to issue a dividend, however my guess would be that it does. Otherwise there would be no incentive for companies to offer them.
I'll restate an idea I suggested from another thread:
Instead of a dividend, Apple should use this money to start a bank.
Seem crazy? Here's why I think it makes sense:
1. I hate my bank and every bank I've ever had. The website sucks and I fundamentally don't trust them. Who doesn't agree with that? Seems like a market ripe for disruption.
2. Banking isn't as far afield of Apple's business as it seems. On the consumer side, there's a massive number of financial transactions that are processed through Apple's various stores (online, retail, music, and apps). Instead of paying charges to credit card companies, Apple could grab those charges for itself. On the corporate side, Apple already pushes a fair bit of money into the supply chain -- why not start lending money to their suppliers? And of course banking is becoming increasingly electronic -- that ties in with iCloud and it ties in with using iDevices as a means of payment.
3. Obviously Apple has the cash and brand power to start a bank.
As usual, start it in the US, then expand.
I've floated that idea before. iPhone + NFC + iTunes Store + Apple Bank would be a powerful force. Simplified in the US. An optional debit card. Reward points that translate into iTS credit.
AAPL is approaching $500b Market Cap, and has $100b in cash. Sooner or later it's going to become a cash drag...
'Sooner or later'? With 20% of market cap 10 months' worth of sales in cash? If there was going to be a 'cash drag' it's already there. Yet the stock is doing fine, thank you.
Second, that would result in an immediate drop of around $50 per share in value (look up my post in the other thread where I provided evidence that this would happen based on other companies and mutual funds which have offered large dividends).
Third, there would be a large corporate income tax hit in bringing the money back to the U.S. That would probably cause the stock to drop by MORE than the value of the dividend.
Fourth, there would be a large tax hit to the dividend recipient since dividends are taxable income. The result is that I would receive less money than the drop in the value of the stock.
Fifth, the argument that a dividend would have a positive effect on the share price is nothing more than unfounded speculation. Compare Microsoft to Apple for the past 10 years. Microsoft offers a dividend, Apple does not. Or Dell. Or almost any other company. If an institutional investor is not happy with the returns that AAPL has generated over the past decade, a dividend won't change their mind.
Overall, it's a crazy idea. If they really want to use the money to shore up stock prices, a stock buyback makes infinitely more sense.
That just about says it all.
Now, this post should be the cut-and-pasted as the next Apple-related financial story on AI (jragosta, just add some bogus 'stock price forecast' and submit it to AI! )
I do not want or need dividends. It only subjects me to tax. I own APPL for my retirement, which is many years away. When I need to access the money, I can sell the stock and pay capital gains tax rates, so who needs a dividend? A stock buyback on the other hand, is fine. By reducing the number of outstanding shares while profit is still on a strong upward swing, it is the best way to maximize the value per share. Thankfully, Tim Cook and the board understand these things, as evidenced by Tim's remarks at the shareholder meeting.
I'll restate an idea I suggested from another thread:
Instead of a dividend, Apple should use this money to start a bank.
Seem crazy? Here's why I think it makes sense:
1. I hate my bank and every bank I've ever had. The website sucks and I fundamentally don't trust them. Who doesn't agree with that? Seems like a market ripe for disruption.
2. Banking isn't as far afield of Apple's business as it seems. On the consumer side, there's a massive number of financial transactions that are processed through Apple's various stores (online, retail, music, and apps). Instead of paying charges to credit card companies, Apple could grab those charges for itself. On the corporate side, Apple already pushes a fair bit of money into the supply chain -- why not start lending money to their suppliers? And of course banking is becoming increasingly electronic -- that ties in with iCloud and it ties in with using iDevices as a means of payment.
3. Obviously Apple has the cash and brand power to start a bank.
As usual, start it in the US, then expand.
Apple to reinvent the banking system? They reinvented so many things that's true and amazing! And with Tim Cook and his golden hands for everything with finances! Hmm... May not be the craziest Idea.
I've floated that idea before. iPhone + NFC + iTunes Store + Apple Bank would be a powerful force. Simplified in the US. An optional debit card. Reward points that translate into iTS credit.
But please let iBank be global. I trust Apple more than any of our swiss banks.
That would be a huge mistake has it doesnt address at all the problem of allowing more funds to buy Apple. Not to mention that most of the cash is not available since its off shore.
And 50 billions means 50$ per share, not 5$.
Agreed. As an AAPL shareholder I don't want that $50 per share, I really don't. Keep it in the pot for when times are hard, because at some point, times will get hard. I can't personally see any potential for negativity in 5 or 10 years or more, but it will happen.
Law of large numbers is the problem. I think they should do both, a regular dividend on the common share to allow more funds to buy Apple and buybacks to artificially rise the stock prices. I dont like buybacks but since Apple has so much $ its not a big issue if they keep it under control.
I agree with your thought process, a regular dividend + stock buyback would be positive for AAPL stock. And I agree with most of the professional stock analysts that believe a regular dividend payment would open AAPL up to an entirely new investor base.
The "law of large numbers" (LLN) is a theorem that describes the result of performing the same experiment a large number of times.(WIKI)
The Media constantly misuses LLN in relation to AAPL, its annoying. If you think the market cap of Apple is too large relative to their market share and don't see their ability to raise their market share, say that. BUT PLEASE don't use an incorrect Theorem. Probably not your fault since CNBC talking heads constantly misuse LLN.
Technically, about $70 billion are in long-term investments. The amount of "cash" and short-term investments has been mostly flat around $25 billion since Q4-08. It may be more correct to say that Apple's balance sheet resembles that of a profitable manufacturer of consumer electronics who also happens to operate a large investment fund. The formula worked for Porsche for many years. They were essentially a hedge fund that also made cars.
Maybe Apple could essentially create a venture capital fund within itself to fund start-ups and research. That would be more productive than a simple dividend or buyback.
That said, I think tax law and the election will play a big role in this decision. The special 15% tax rate on dividends is set to expire this year. If Obama is re-elected (which I say is about a 60% probability) then it is likely that the dividend tax rate will rise in 2013, which would give Apple an incentive to declare a special dividend in calendar 2012, if they do intend to do so (to give US shareholders the benefit of the lower rate).
Also, Obama's proposed budget calls for a minimum tax on overseas earnings. Apple has been calling for essentially the opposite - a tax "holiday" on repatriation of overseas earnings, similar to what the Bush administration did in the early 2000s. Depending on how the tax code ultimately shapes up, Apple's cash/investment management strategy is likely to adapt. It must be exciting times in Apple's treasury and tax departments right now.
I do not want or need dividends. It only subjects me to tax. I own APPL for my retirement, which is many years away. When I need to access the money, I can sell the stock and pay capital gains tax rates, so who needs a dividend? A stock buyback on the other hand, is fine. By reducing the number of outstanding shares while profit is still on a strong upward swing, it is the best way to maximize the value per share. Thankfully, Tim Cook and the board understand these things, as evidenced by Tim's remarks at the shareholder meeting.
I do not want or need dividends. It only subjects me to tax. I own APPL for my retirement, which is many years away.
Then isn't it in a tax sheltered account like an IRA? If not, why?
Quote:
Originally Posted by cws
A stock buyback on the other hand, is fine. By reducing the number of outstanding shares while profit is still on a strong upward swing, it is the best way to maximize the value per share.
Stock buybacks don't often transfer wealth to shareholders. Stocks can and do go down when companies buy back shares. Just ask HP. A dividend however is a direct transfer of company profits to shareholders. That's why a lot of people invest in stocks.
Apple to reinvent the banking system? They reinvented so many things that's true and amazing! And with Tim Cook and his golden hands for everything with finances! Hmm... May not be the craziest Idea.
I remember Steve talking about focus and how that meant saying NO to ideas. Some that are even good ideas but that by saying NO to some ideas that allowed their focus to be sharpest on the best ideas.
This is a ridiculous idea for a tech company like Apple. Its beyond their core competency and I would sell Apple stock immediately if they announced such a stupid plan. I think others would as well.
Comments
Moving the needle in the future will require huge investment. I think they should build up to 250 Billion before settling down and giving a larger percentage.
Can you give a little background on why you think huge investments will be required? What company besides Apple could amass that kind of cash stockpile even if given 10 years to do it? So only Apple will ever be able to move the needle because they're the only ones that could have such a war chest? You want Apple to have more in cash than the entire market capitalization of all but a couple of the biggest public companies in the world. To me there doesn't seem to be any rational argument to support that theory. I would be glad to hear one.
Fifth, the argument that a dividend would have a positive effect on the share price is nothing more than unfounded speculation. Compare Microsoft to Apple for the past 10 years. Microsoft offers a dividend, Apple does not. Or Dell. Or almost any other company. If an institutional investor is not happy with the returns that AAPL has generated over the past decade, a dividend won't change their mind.
Overall, it's a crazy idea. If they really want to use the money to shore up stock prices, a stock buyback makes infinitely more sense.
Law of large numbers is the problem. I think they should do both, a regular dividend on the common share to allow more funds to buy Apple and buybacks to artificially rise the stock prices. I dont like buybacks but since Apple has so much $ its not a big issue if they keep it under control.
Instead of a dividend, Apple should use this money to start a bank.
Seem crazy? Here's why I think it makes sense:
1. I hate my bank and every bank I've ever had. The website sucks and I fundamentally don't trust them. Who doesn't agree with that? Seems like a market ripe for disruption.
2. Banking isn't as far afield of Apple's business as it seems. On the consumer side, there's a massive number of financial transactions that are processed through Apple's various stores (online, retail, music, and apps). Instead of paying charges to credit card companies, Apple could grab those charges for itself. On the corporate side, Apple already pushes a fair bit of money into the supply chain -- why not start lending money to their suppliers? And of course banking is becoming increasingly electronic -- that ties in with iCloud and it ties in with using iDevices as a means of payment.
3. Obviously Apple has the cash and brand power to start a bank.
As usual, start it in the US, then expand.
Fifth, the argument that a dividend would have a positive effect on the share price is nothing more than unfounded speculation. Compare Microsoft to Apple for the past 10 years. Microsoft offers a dividend, Apple does not. Or Dell. Or almost any other company. If an institutional investor is not happy with the returns that AAPL has generated over the past decade, a dividend won't change their mind.
You're 5th point doesn't seem like a rational argument to me.
Wouldn't it make much more sense to compare the price of any of the mentioned stocks against themselves from before they instituted a dividend and then afterward (maybe trailing and following 6 months/1 year)? Then you can see what offering a dividend did to that particular stock. If you do a broad enough survey you should be able to see a reliable pattern. Comparing those stocks relative to Apple is completely illogical when deciding if beginning to issue a dividend is beneficial for Apple.
It's possible that a company's stock price doesn't generally benefit from beginning to issue a dividend, however my guess would be that it does. Otherwise there would be no incentive for companies to offer them.
I'll restate an idea I suggested from another thread:
Instead of a dividend, Apple should use this money to start a bank.
Seem crazy? Here's why I think it makes sense:
1. I hate my bank and every bank I've ever had. The website sucks and I fundamentally don't trust them. Who doesn't agree with that? Seems like a market ripe for disruption.
2. Banking isn't as far afield of Apple's business as it seems. On the consumer side, there's a massive number of financial transactions that are processed through Apple's various stores (online, retail, music, and apps). Instead of paying charges to credit card companies, Apple could grab those charges for itself. On the corporate side, Apple already pushes a fair bit of money into the supply chain -- why not start lending money to their suppliers? And of course banking is becoming increasingly electronic -- that ties in with iCloud and it ties in with using iDevices as a means of payment.
3. Obviously Apple has the cash and brand power to start a bank.
As usual, start it in the US, then expand.
I've floated that idea before. iPhone + NFC + iTunes Store + Apple Bank would be a powerful force. Simplified in the US. An optional debit card. Reward points that translate into iTS credit.
C'mon, AI, you don't have to report things just because some random 'analyst' spouts stuff.
AAPL is approaching $500b Market Cap, and has $100b in cash. Sooner or later it's going to become a cash drag...
'Sooner or later'? With 20% of market cap 10 months' worth of sales in cash? If there was going to be a 'cash drag' it's already there. Yet the stock is doing fine, thank you.
First, $50 B would be $50 per share.
Second, that would result in an immediate drop of around $50 per share in value (look up my post in the other thread where I provided evidence that this would happen based on other companies and mutual funds which have offered large dividends).
Third, there would be a large corporate income tax hit in bringing the money back to the U.S. That would probably cause the stock to drop by MORE than the value of the dividend.
Fourth, there would be a large tax hit to the dividend recipient since dividends are taxable income. The result is that I would receive less money than the drop in the value of the stock.
Fifth, the argument that a dividend would have a positive effect on the share price is nothing more than unfounded speculation. Compare Microsoft to Apple for the past 10 years. Microsoft offers a dividend, Apple does not. Or Dell. Or almost any other company. If an institutional investor is not happy with the returns that AAPL has generated over the past decade, a dividend won't change their mind.
Overall, it's a crazy idea. If they really want to use the money to shore up stock prices, a stock buyback makes infinitely more sense.
That just about says it all.
Now, this post should be the cut-and-pasted as the next Apple-related financial story on AI (jragosta, just add some bogus 'stock price forecast' and submit it to AI!
I'll restate an idea I suggested from another thread:
Instead of a dividend, Apple should use this money to start a bank.
Seem crazy? Here's why I think it makes sense:
1. I hate my bank and every bank I've ever had. The website sucks and I fundamentally don't trust them. Who doesn't agree with that? Seems like a market ripe for disruption.
2. Banking isn't as far afield of Apple's business as it seems. On the consumer side, there's a massive number of financial transactions that are processed through Apple's various stores (online, retail, music, and apps). Instead of paying charges to credit card companies, Apple could grab those charges for itself. On the corporate side, Apple already pushes a fair bit of money into the supply chain -- why not start lending money to their suppliers? And of course banking is becoming increasingly electronic -- that ties in with iCloud and it ties in with using iDevices as a means of payment.
3. Obviously Apple has the cash and brand power to start a bank.
As usual, start it in the US, then expand.
Apple to reinvent the banking system? They reinvented so many things that's true and amazing! And with Tim Cook and his golden hands for everything with finances! Hmm... May not be the craziest Idea.
I've floated that idea before. iPhone + NFC + iTunes Store + Apple Bank would be a powerful force. Simplified in the US. An optional debit card. Reward points that translate into iTS credit.
But please let iBank be global. I trust Apple more than any of our swiss banks.
It's amazing how many people are trying to get Apple's cash. The stockholders want dividends and their competitors are suing.
It's called capitalism.
That would be a huge mistake has it doesnt address at all the problem of allowing more funds to buy Apple. Not to mention that most of the cash is not available since its off shore.
And 50 billions means 50$ per share, not 5$.
Agreed. As an AAPL shareholder I don't want that $50 per share, I really don't. Keep it in the pot for when times are hard, because at some point, times will get hard. I can't personally see any potential for negativity in 5 or 10 years or more, but it will happen.
Law of large numbers is the problem. I think they should do both, a regular dividend on the common share to allow more funds to buy Apple and buybacks to artificially rise the stock prices. I dont like buybacks but since Apple has so much $ its not a big issue if they keep it under control.
I agree with your thought process, a regular dividend + stock buyback would be positive for AAPL stock. And I agree with most of the professional stock analysts that believe a regular dividend payment would open AAPL up to an entirely new investor base.
The "law of large numbers" (LLN) is a theorem that describes the result of performing the same experiment a large number of times.(WIKI)
The Media constantly misuses LLN in relation to AAPL, its annoying. If you think the market cap of Apple is too large relative to their market share and don't see their ability to raise their market share, say that. BUT PLEASE don't use an incorrect Theorem. Probably not your fault since CNBC talking heads constantly misuse LLN.
Maybe Apple could essentially create a venture capital fund within itself to fund start-ups and research. That would be more productive than a simple dividend or buyback.
That said, I think tax law and the election will play a big role in this decision. The special 15% tax rate on dividends is set to expire this year. If Obama is re-elected (which I say is about a 60% probability) then it is likely that the dividend tax rate will rise in 2013, which would give Apple an incentive to declare a special dividend in calendar 2012, if they do intend to do so (to give US shareholders the benefit of the lower rate).
Also, Obama's proposed budget calls for a minimum tax on overseas earnings. Apple has been calling for essentially the opposite - a tax "holiday" on repatriation of overseas earnings, similar to what the Bush administration did in the early 2000s. Depending on how the tax code ultimately shapes up, Apple's cash/investment management strategy is likely to adapt. It must be exciting times in Apple's treasury and tax departments right now.
I do not want or need dividends. It only subjects me to tax. I own APPL for my retirement, which is many years away. When I need to access the money, I can sell the stock and pay capital gains tax rates, so who needs a dividend? A stock buyback on the other hand, is fine. By reducing the number of outstanding shares while profit is still on a strong upward swing, it is the best way to maximize the value per share. Thankfully, Tim Cook and the board understand these things, as evidenced by Tim's remarks at the shareholder meeting.
Smartest kid in class.
A++
So Apple has so much money it can't make more money of out it so it will give it back to the shareholders. Looks like it's time to sell.
Don't you mean 'back to the customers'? You know, the ones that actually pay THE company, not pay FOR the company.
I do not want or need dividends. It only subjects me to tax. I own APPL for my retirement, which is many years away.
Then isn't it in a tax sheltered account like an IRA? If not, why?
A stock buyback on the other hand, is fine. By reducing the number of outstanding shares while profit is still on a strong upward swing, it is the best way to maximize the value per share.
Stock buybacks don't often transfer wealth to shareholders. Stocks can and do go down when companies buy back shares. Just ask HP. A dividend however is a direct transfer of company profits to shareholders. That's why a lot of people invest in stocks.
Apple to reinvent the banking system? They reinvented so many things that's true and amazing! And with Tim Cook and his golden hands for everything with finances! Hmm... May not be the craziest Idea.
I remember Steve talking about focus and how that meant saying NO to ideas. Some that are even good ideas but that by saying NO to some ideas that allowed their focus to be sharpest on the best ideas.
This is a ridiculous idea for a tech company like Apple. Its beyond their core competency and I would sell Apple stock immediately if they announced such a stupid plan. I think others would as well.