AAPL is approaching $500b Market Cap, and has $100b in cash. Sooner or later it's going to become a cash drag, although maybe not immediately right now. Look at Buffett, he's asking you to help him find things to buy because he's running out of ideas. Anyhow, how can we all be trusting that this isn't another bubble all directed into a single stock? A lot of people buy this thing because they believe it's their saving grace without knowing the fundamentals.
GOOG is big too, yet all those new ideas are still not generating them enough to deem them truly useful compared to good ol' bread and butter Search.
Cash drag? If apple does not squander its cash, they will have the entire market cap in cash within 5 years time. Think about that. Apple could theoretically buy itself in 5 years with no share price appretiation from here. Apple should not have a negative future value so the share price will rise.
Stock buybacks don't often transfer wealth to shareholders. Stocks can and do go down when companies buy back shares. Just ask HP.
There are many reasons to buy back stock but in the case of Apple doing so would strengthen each share. It would be, among other things, an indication from Apple that their stock price is undervalued.
Quote:
A dividend however is a direct transfer of company profits to shareholders. That's why a lot of people invest in stocks.
People who buy stocks to get dividends from a stock that doesn't offer dividends is an idiot. I say this as a person who retired at 30 and lives solely off my stock dividends. I bought Apple and other non-dividend stocks because I expected a growth in the stock value itself.
In general I don't think it's a good idea for tech companies to pay dividends because of the volatility of the market. Apple can surely afford to pay them but look back to when people expected Apple to pay them. They now pay out more in lump sum cash payments for components than they had cash just a few years ago. In tech you need a bigger safety net than other markets.
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.
If we just consider a bank and nothing else it looks silly but if we consider what a modern banking system is what Apple has that mirrors that it doesn't look silly at all. Consider the 400 million CCs Apple has on file. Consider all the machines (which include Windows via iTunes) that are tied to their transaction servers. Sure, "PC guys aren't just going to figure this out" but remember how that worked out the last time someone said that and note that what Apple does iTunes Store back end is a lot closer banking than what they done with a cellphone. Now consider that NFC is banking and will not take off until a company like Apple can get behind it to tie all the parts together.
PS: You can already go into an Apple Store and use your iPhone to buy a product without interacting with the staff. It deducts from the card you have on file with iTS and the receipt is emailed to you.
Stock buybacks are easy. Let's say that the market values the entire company at $500 B and there are 1 B shares. That means that each share is valued at $500.
Now, if Apple buys back 10% of its shares, there are only 900 M shares in circulation, but the market valuation doesn't change (the cash is replaced with something of equal value - the shares). So the share price would be about $555.
Quote:
Originally Posted by GregInPrague
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.
There is absolutely no valid evidence to support your argument that a dividend increases share price. In fact, you will find that dividends tend to be used by companies with low or no growth and companies with fast growth tend not to use dividends. Basically, you use a dividend if you can't find a way to invest the money in the business to grow the business.
Your choice of examples is actually not as good as mine, but if you want to have it that way, look at Microsoft's growth rates before they started giving a dividend and after. They grew a rapid rates until they started the dividend and they've been flat (or down) since then.
That makes no sense. Apple will make close to $50 EPS or over $50 billion in profit this year. They are also growing earnings over 100% year over year. Apple has FAR more money than they need and the cash is generated rapidly. The point of a publicly traded business is to return value to its owners, the shareholders. This is a good thing. It points to apples strength not weakness.
Good luck making that case around here. Most people on this board not only don't understand this principle, they adamantly and aggressively misunderstand it.
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.
This is just plain bizarre reasoning. Please think about what you are saying. If Apple ever had to fund operations out cash reserves, then this would mean the company is losing money. Would you seriously want to be an AAPL investor if they went from being one of the most profitable companies on the planet to losing money?
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.
jragosta's 5th argument also doesn't make sense because he contradicts himself in the very next sentence. MSFT has done stock repurchases along with dividend payments.
Stock buybacks are easy. Let's say that the market values the entire company at $500 B and there are 1 B shares. That means that each share is valued at $500.
Now, if Apple buys back 10% of its shares, there are only 900 M shares in circulation, but the market valuation doesn't change (the cash is replaced with something of equal value - the shares). So the share price would be about $555.
There is absolutely no valid evidence to support your argument that a dividend increases share price. In fact, you will find that dividends tend to be used by companies with low or no growth and companies with fast growth tend not to use dividends. Basically, you use a dividend if you can't find a way to invest the money in the business to grow the business.
Your choice of examples is actually not as good as mine, but if you want to have it that way, look at Microsoft's growth rates before they started giving a dividend and after. They grew a rapid rates until they started the dividend and they've been flat (or down) since then.
There have been studies that show dividends are beneficial to stock prices.
MSFT has been doing stock buybacks along with dividends. You can't then argue that it was the dividend that flatlined MSFT and then ignore the stock repurchases.
So how much does Apple have for a reasonable buyback? Don't say $100 billion because that is false. You have to exclude monies tied up in securities and funds that would have to be transferred from another country thus being taxed. For instance, take the number of US held shares and the amount of US cash reserves (and cash that would come up in short and long term securities maturing) and you can find what they have per share.
People who buy stocks to get dividends from a stock that doesn't offer dividends is an idiot. I say this as a person who retired at 30 and lives solely off my stock dividends.
I always wondered how you managed to be that active on Ai
However, I imagine you do that from some WiFi enabled California beach resort?
Good luck making that case around here. Most people on this board not only don't understand this principle, they adamantly and aggressively misunderstand it.
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.
Apple doesn't seem well suited to the banking business. At least philosophically. Sure they have enough money to enter any business they choose, however, keep in mind that they have suggested one of the secrets to their current success can be attributed to keeping their product line lean. I don't remember how many products they said but it is astoundingly low for a fortune 100 company.
I think Apple entering the banking industry would flop just like Apple entering the social network industry did. They should concentrate on insanely great tech and leave banking to the bean counters.
Apple doesn't seem well suited to the banking business. At least philosophically. Sure they have enough money to enter any business they choose, however, keep in mind that they have suggested one of the secrets to their current success can be attributed to keeping their product line lean. I don't remember how many products they said but it is astoundingly low for a fortune 100 company.
I think Apple entering the banking industry would flop just like Apple entering the social network industry did. They should concentrate on insanely great tech and leave banking to the bean counters.
I'm not suggesting that Apple follow in the footsteps of Bank of America, I'm suggesting they just continue doing what they've been doing for a decade with iTunes Store and now with their ability to pay for items with your iPhone at an Apple Store.. just with all other stores.
If they would no longer have to pay a percentage fee to MC and Visa per transaction they could pass some of that savings back to you in terms of free iTS merchandise which is just another win for them.
The only change they have to make is to add NFC (which is surely coming anyway) and have a way for direct deposit added to your account. No need to do home loans and other banking solutions.
I always wondered how you managed to be that active on Ai
However, I imagine you do that from some WiFi enabled California beach resort?
I am in CA but my tastes are much simpler than that. I do travel often and spend a lot my time on this site in lines while waiting for planes and trains. If only I saved enough to buy a private jet.
I don't care about speculation about dividends. The interesting part of the article was this bit:
But he believes the creation of a dividend could create a "scarcity issue" for AAPL shares, as the iPhone maker's stock is currently under-owned by institutions. Even though Apple is the largest stock in the Russell 1000, 40 percent of mutual funds indexed to the Russell 1000 do not have Apple as a top 10 holding.
In addition, Moskowitz noted that 77 percent of Apple's shares are held institutionally. That's lower than the average among companies in the S&P 500, and it's also lower than the average technology sector holding.
First, an index fund is supposed to mimic the thing it's indexed against. And somehow 40% of funds (supposedly) indexed against the Russell 1000 do not have the single biggest stock in their top-10? Sounds like 40% of index funds need to check their math.
The second paragraph is probably misleading. On the face of it, it implies that fund managers are less likely to invest in Apple than other stocks. That would be pretty bad, since AAPL has been one of the best investments available in recent years. But as I said, I suspect that's a misinterpretation. There are few fund managers not betting on AAPL. I expect the reason why "just" 77% of shares are held by institutional investors is because AAPL is incredibly popular with regular people (non-institutional investors) like myself. It's been such a success story in recent years that everyone and his mother is buying Apple stock. Thus, the interesting part is that 23% of shares are owned by individual investors. That makes sense. My portfolio consists of lots of mutual funds and stock in one company (and guess which investment I'm happiest with).
There are many reasons to buy back stock but in the case of Apple doing so would strengthen each share. It would be, among other things, an indication from Apple that their stock price is undervalued..
All companies that buy back stock believe its undervalued. No company would buy back stock that they feel is fairly or overly valued.
Quote:
Originally Posted by SolipsismX
People who buy stocks to get dividends from a stock that doesn't offer dividends is an idiot. I say this as a person who retired at 30 and lives solely off my stock dividends. I bought Apple and other non-dividend stocks because I expected a growth in the stock value itself.
In general I don't think it's a good idea for tech companies to pay dividends because of the volatility of the market. Apple can surely afford to pay them but look back to when people expected Apple to pay them. They now pay out more in lump sum cash payments for components than they had cash just a few years ago. In tech you need a bigger safety net than other markets.
But even if you are buying a growth stock eventually you hope to share in its profits, no?
That's the raison d'être of owning a business, either directly or through holding the stock. Apple have nearly 100 billion in cash and its equivalents. The only reason NOT to pay a dividend is if you think they are immediately going to start loosing money. Possible but very unlikely. Sure Apple could loose money five years form now, but companies suspend their dividends ar reduce them under those circumstances. Thats how businesses operate.
But at this point I feel Apple should start paying a dividend out of their enormous free cash flow. They are throwing off a billion per month now IIRC. There can't spend that money strategically on anything. A chip processing facility, which is extremely expensive to build, ask AMD, only (I know its ironic to use this term in this context) costs 5 billion USD. Data farm, 1-2 billion. These costs are now insignificant for Apple. Its time for a dividend.
The second paragraph is probably misleading. On the face of it, it implies that fund managers are less likely to invest in Apple than other stocks.
It's not misleading, it's simply incomplete. Many investment funds have rules requiring their holdings to pay dividends. They are not allowed to buy stocks which do not.
Comments
AAPL is approaching $500b Market Cap, and has $100b in cash. Sooner or later it's going to become a cash drag, although maybe not immediately right now. Look at Buffett, he's asking you to help him find things to buy because he's running out of ideas. Anyhow, how can we all be trusting that this isn't another bubble all directed into a single stock? A lot of people buy this thing because they believe it's their saving grace without knowing the fundamentals.
GOOG is big too, yet all those new ideas are still not generating them enough to deem them truly useful compared to good ol' bread and butter Search.
Cash drag? If apple does not squander its cash, they will have the entire market cap in cash within 5 years time. Think about that. Apple could theoretically buy itself in 5 years with no share price appretiation from here. Apple should not have a negative future value so the share price will rise.
Stock buybacks don't often transfer wealth to shareholders. Stocks can and do go down when companies buy back shares. Just ask HP.
There are many reasons to buy back stock but in the case of Apple doing so would strengthen each share. It would be, among other things, an indication from Apple that their stock price is undervalued.
A dividend however is a direct transfer of company profits to shareholders. That's why a lot of people invest in stocks.
People who buy stocks to get dividends from a stock that doesn't offer dividends is an idiot. I say this as a person who retired at 30 and lives solely off my stock dividends. I bought Apple and other non-dividend stocks because I expected a growth in the stock value itself.
In general I don't think it's a good idea for tech companies to pay dividends because of the volatility of the market. Apple can surely afford to pay them but look back to when people expected Apple to pay them. They now pay out more in lump sum cash payments for components than they had cash just a few years ago. In tech you need a bigger safety net than other markets.
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.
If we just consider a bank and nothing else it looks silly but if we consider what a modern banking system is what Apple has that mirrors that it doesn't look silly at all. Consider the 400 million CCs Apple has on file. Consider all the machines (which include Windows via iTunes) that are tied to their transaction servers. Sure, "PC guys aren't just going to figure this out" but remember how that worked out the last time someone said that and note that what Apple does iTunes Store back end is a lot closer banking than what they done with a cellphone. Now consider that NFC is banking and will not take off until a company like Apple can get behind it to tie all the parts together.
PS: You can already go into an Apple Store and use your iPhone to buy a product without interacting with the staff. It deducts from the card you have on file with iTS and the receipt is emailed to you.
Potentially dumb question but hoping someone more informed could explain:
Could Apple offer a dividend AND do a stock buy backs at the same time?.. To offer value to shareholders without decreasing the value of shares?
:?
Apple could do both, but the effect on the share price would be indeterminate.
You win this thread.
And please, tell me more about a stock buyback.
Stock buybacks are easy. Let's say that the market values the entire company at $500 B and there are 1 B shares. That means that each share is valued at $500.
Now, if Apple buys back 10% of its shares, there are only 900 M shares in circulation, but the market valuation doesn't change (the cash is replaced with something of equal value - the shares). So the share price would be about $555.
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.
There is absolutely no valid evidence to support your argument that a dividend increases share price. In fact, you will find that dividends tend to be used by companies with low or no growth and companies with fast growth tend not to use dividends. Basically, you use a dividend if you can't find a way to invest the money in the business to grow the business.
Your choice of examples is actually not as good as mine, but if you want to have it that way, look at Microsoft's growth rates before they started giving a dividend and after. They grew a rapid rates until they started the dividend and they've been flat (or down) since then.
That makes no sense. Apple will make close to $50 EPS or over $50 billion in profit this year. They are also growing earnings over 100% year over year. Apple has FAR more money than they need and the cash is generated rapidly. The point of a publicly traded business is to return value to its owners, the shareholders. This is a good thing. It points to apples strength not weakness.
Good luck making that case around here. Most people on this board not only don't understand this principle, they adamantly and aggressively misunderstand it.
There is absolutely no valid evidence to support your argument that a dividend increases share price.
Untrue.
http://seekingalpha.com/article/3583...money-knows-it
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.
This is just plain bizarre reasoning. Please think about what you are saying. If Apple ever had to fund operations out cash reserves, then this would mean the company is losing money. Would you seriously want to be an AAPL investor if they went from being one of the most profitable companies on the planet to losing money?
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.
jragosta's 5th argument also doesn't make sense because he contradicts himself in the very next sentence. MSFT has done stock repurchases along with dividend payments.
http://www.microsoft.com/presspass/p...2dividend.mspx
Stock buybacks are easy. Let's say that the market values the entire company at $500 B and there are 1 B shares. That means that each share is valued at $500.
Now, if Apple buys back 10% of its shares, there are only 900 M shares in circulation, but the market valuation doesn't change (the cash is replaced with something of equal value - the shares). So the share price would be about $555.
There is absolutely no valid evidence to support your argument that a dividend increases share price. In fact, you will find that dividends tend to be used by companies with low or no growth and companies with fast growth tend not to use dividends. Basically, you use a dividend if you can't find a way to invest the money in the business to grow the business.
Your choice of examples is actually not as good as mine, but if you want to have it that way, look at Microsoft's growth rates before they started giving a dividend and after. They grew a rapid rates until they started the dividend and they've been flat (or down) since then.
There have been studies that show dividends are beneficial to stock prices.
http://www.marketwatch.com/story/app...ion-2012-02-24
MSFT and AAPL are not the same company.
MSFT has been doing stock buybacks along with dividends. You can't then argue that it was the dividend that flatlined MSFT and then ignore the stock repurchases.
http://www.microsoft.com/presspass/p...2dividend.mspx
http://www.microsoft.com/presspass/inside_ms.mspx
People who buy stocks to get dividends from a stock that doesn't offer dividends is an idiot. I say this as a person who retired at 30 and lives solely off my stock dividends.
I always wondered how you managed to be that active on Ai
However, I imagine you do that from some WiFi enabled California beach resort?
Good luck making that case around here. Most people on this board not only don't understand this principle, they adamantly and aggressively misunderstand it.
You are 100% correct.
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.
Apple doesn't seem well suited to the banking business. At least philosophically. Sure they have enough money to enter any business they choose, however, keep in mind that they have suggested one of the secrets to their current success can be attributed to keeping their product line lean. I don't remember how many products they said but it is astoundingly low for a fortune 100 company.
I think Apple entering the banking industry would flop just like Apple entering the social network industry did. They should concentrate on insanely great tech and leave banking to the bean counters.
Apple doesn't seem well suited to the banking business. At least philosophically. Sure they have enough money to enter any business they choose, however, keep in mind that they have suggested one of the secrets to their current success can be attributed to keeping their product line lean. I don't remember how many products they said but it is astoundingly low for a fortune 100 company.
I think Apple entering the banking industry would flop just like Apple entering the social network industry did. They should concentrate on insanely great tech and leave banking to the bean counters.
I'm not suggesting that Apple follow in the footsteps of Bank of America, I'm suggesting they just continue doing what they've been doing for a decade with iTunes Store and now with their ability to pay for items with your iPhone at an Apple Store.. just with all other stores.
If they would no longer have to pay a percentage fee to MC and Visa per transaction they could pass some of that savings back to you in terms of free iTS merchandise which is just another win for them.
The only change they have to make is to add NFC (which is surely coming anyway) and have a way for direct deposit added to your account. No need to do home loans and other banking solutions.
I always wondered how you managed to be that active on Ai
However, I imagine you do that from some WiFi enabled California beach resort?
I am in CA but my tastes are much simpler than that. I do travel often and spend a lot my time on this site in lines while waiting for planes and trains. If only I saved enough to buy a private jet.
The second paragraph is probably misleading. On the face of it, it implies that fund managers are less likely to invest in Apple than other stocks. That would be pretty bad, since AAPL has been one of the best investments available in recent years. But as I said, I suspect that's a misinterpretation. There are few fund managers not betting on AAPL. I expect the reason why "just" 77% of shares are held by institutional investors is because AAPL is incredibly popular with regular people (non-institutional investors) like myself. It's been such a success story in recent years that everyone and his mother is buying Apple stock. Thus, the interesting part is that 23% of shares are owned by individual investors. That makes sense. My portfolio consists of lots of mutual funds and stock in one company (and guess which investment I'm happiest with).
There are many reasons to buy back stock but in the case of Apple doing so would strengthen each share. It would be, among other things, an indication from Apple that their stock price is undervalued..
All companies that buy back stock believe its undervalued. No company would buy back stock that they feel is fairly or overly valued.
People who buy stocks to get dividends from a stock that doesn't offer dividends is an idiot. I say this as a person who retired at 30 and lives solely off my stock dividends. I bought Apple and other non-dividend stocks because I expected a growth in the stock value itself.
In general I don't think it's a good idea for tech companies to pay dividends because of the volatility of the market. Apple can surely afford to pay them but look back to when people expected Apple to pay them. They now pay out more in lump sum cash payments for components than they had cash just a few years ago. In tech you need a bigger safety net than other markets.
But even if you are buying a growth stock eventually you hope to share in its profits, no?
That's the raison d'être of owning a business, either directly or through holding the stock. Apple have nearly 100 billion in cash and its equivalents. The only reason NOT to pay a dividend is if you think they are immediately going to start loosing money. Possible but very unlikely. Sure Apple could loose money five years form now, but companies suspend their dividends ar reduce them under those circumstances. Thats how businesses operate.
But at this point I feel Apple should start paying a dividend out of their enormous free cash flow. They are throwing off a billion per month now IIRC. There can't spend that money strategically on anything. A chip processing facility, which is extremely expensive to build, ask AMD, only (I know its ironic to use this term in this context) costs 5 billion USD. Data farm, 1-2 billion. These costs are now insignificant for Apple. Its time for a dividend.
The second paragraph is probably misleading. On the face of it, it implies that fund managers are less likely to invest in Apple than other stocks.
It's not misleading, it's simply incomplete. Many investment funds have rules requiring their holdings to pay dividends. They are not allowed to buy stocks which do not.