Dividend seen bringing $4B additional investment dollars to Apple - Page 2

A stock split would sure be nice. It would expand the investor base. This may or may not raise the stock price but it would provide a lot of inertia that would tend to inhibit stock manipulation.

I seriously, SERIOUSLY doubt that.

That's one way to look at it, but every case is different. For someone who wants to take profits on a portion of their holdings at a given price they can make a lot of sense. Also, for a stock that fluctuates wildly like aapl they can increase your income greatly if you're looking to cash in on some of the swings. When aapl hits a new high there's usually a pretty big sell-off coming soon.

Like I said, they're not perfect. But it's another tool you can use to take advantage of the money you've invested in aapl.

You won't be the only one.

Not a bad idea.

Splits are quite irrelevant.

That war chest is strategic to Apple kicking everyones' asses in the supply chain.

Why?... once you start down the dividend road, its almost expected that it should grow at least annually.... that's a big comittment for a tech company....

On the other hand, a share buy back can be quantified by the amount of money set aside and is conditional on pulling a trigger as a business decision. This is more in Apple style.

If the stock market tanks... many great opportunities will abound.... even an anti-trust acquision that would never pass muster would have a chance (to save jobs and create stability).

A buy back would also help offset the dilution of stock options that are looming just down the road and help push them into the money for all the top executives who just got big grants.

Bet on the stock buy back if you think Apple might change its long-standing policy.

I would love to see a stock split and then have the value go back up to this $350+ range. The analysts would drop a load trying to come up with the reasons why, blah blah

"Twas ever thus". .....

This is likely exactly what they are doing, but it takes time to work through the politics etc

I think something similar could have been said at one time about processor manufacturers. And retail establishments.

Recall Apple got lucky AT&T was desperate enough to hand over control to Apple on those first iphones...

The argument would be that a carrier (not Sprint) would provide Apple with a way to market its television product as an integrated solution. you turn it on and it works. Recall that while recuperating from liver transplant surgery, Steve Jobs called the CEO of Comcast to tell him that his HD product sucked...

Cellular companies ARE like utilities ... and these pipes become quite valuable when there are capacity constraints.

If you are going to reinvent television...maybe do away with television networks...you better have the bandwidth on hand to transmit all that stuff turnkey. You already know about the issues regarding how much pipe is required by just Netflix and how the carriers want to stick it to Netflix users....this is going to be people watching HDTV all day!...

Can Apple reinvent television while relying on the current carriers to just pass the data through?

Because it is in no way shape or form similar to a loan. It's an agreement to sell phones. If Sprint goes bankrupt apple does not lose anything. Buying sprint would be incredibly stupid, thank god they have professionals running apple not forum amateurs.

The problem with television isn't bandwidth: there's plenty of that for streaming movies and regular programs.

The challenge is the content deals, and a large part of that is driven by major sports leagues, cable companies, and television networks. It's the live content with local blackout rules, exclusivity, etc. that makes access via Internet an issue. A few of the leagues have stepped into the tepid waters, but even then one really can't have a choice of every single game.

If television is to be reinvented, it must be addressed beyond the narrow Netflix/Hulu/whatever mindset since those services aren't broadcasting the NFL, the Olympics, or the World Cup.

Wow, you don't think you could do better than zero return on your money? You really have no prospects in life, huh? That's pitiful. I personally think I can make money with my money. I guess I'm part of the 1%, huh?

Agreed. If Apple only had 40 billion in the bank their competitors would think "this Apple is really falling apart, we can drive a hard bargain with Samsung and the like now". Thankfully that extra 40 billion on top of the first 40 billion keeps them at bay. Hopefully the next 20 billion convinces them to stop competing at all!

Duh.

2006: The xMac is released. The Mac Pro, iMac, and Mac Mini are discontinued.
2007: The iPhone, complete with slide-down keyboard, 3G, and thumbprint scanner, is released. Apple's included stylus is found to be lacking, so third-party stylus sales soar.
2008: The MacBook Slate, a 4 pound laptop with a 2.5" SSD and the thinnest Blu-ray drive ever (.5x speed) is released. It has a touchscreen and it swivels around to become a tablet. Novelty giant styluses are sold.
2009: Mac OS 10.6, Lion, is released. Lion obviously includes Rosetta support and reintroduces the Classic environment on Intel with a new extension allowing for Motorola backwards compatibility. Apple also starts shipping computers with USB 3.0 after having removed all FireWire ports during the previous year.
2010: The iSlate is released. Its 7" screen and physical keyboard make it an instant confuser. The industry bashes it as "A small MacBook Slate" and hates its pathetic battery life, blaming the built-in Blu-ray drive. Apple insists it's a new kind of product. Mid-size styluses increase in popularity.
2011: The 5th iPhone is released. It is the second model to include LTE and WiMAX and now sports a 5" display, allowing for the largest slide-down physical keyboard in the cell phone industry.
2012: Apple is rumored to release a 50" HDTV with DirecTV's, Dish Network's, and Comcast's software suites built in for easy access to modern programming presentation formats.

I hope that hurts you as much to read as it hurt me to write. I think I've covered basically every fringe-case cliche this place has ever seen.

A couple of things wrong with this:

• Sprint has no "debt" to Apple. They have a contractual obligation to buy a certain number of iOS devices at certain prices. There is no secured debt.
• If Sprint were unable to meet that obligation, it would not be in Apple's interest to try to sink the company into bankruptcy; this would the be most hostile of takeover attempts, and you don't destroy what you want to acquire
• If Apple wanted Sprint, they could just buy them outright without all the machinations and drama a contract showdown and legal battle would create

Absolutely wrong.

On paper, stock splits SHOULD be irrelevant, but there's plenty of evidence that some types of stocks do better after splits. Prices of several hundred dollars per share scare off small investors and reduce your investing pool.


I don't think any long term Apple investors are crying about the return on their investment.


That's certainly one option - and might make some sense, particularly on the dips.


It doesn't work that way. As they buy up shares, the remaining shares increase in value. Apple's current market cap is $360 B. If they bought every share but one, the remaining share would be worth $360 B (in theory).


Apple's not going there.


They're not ignoring the cheapskate market. That's what the iPad and iPod Touch are for.

Notebook and desktop for under $500? Not a chance. In order to do that profitably, they'd have to make too many compromises and end up selling a junk product - which would merely tarnish their brand.

They're not going to accept 20% margins, either.


They're not going to license iOS to competitors. Just not going to happen. More phone models? Sure - as they come up with configurations where the sacrifices don't make it too much like a POS Android phone.


There has been plenty of speculation on that one and it could happen - if Apple can find a way to make it work well.


Since when has Apple been playing defense? Have you been sleeping for the past 15 years?

How is the divided bringing $4 billion of new investment dollars to Apple?

1. Apple issues $4 billion of new shares? With no dilution?

2. Or the dividend is paid and the demand for Apple stock increases so the market cap goes up $4 billion?
From $360 billion to $364 billion? Or about 1% increase? Apple is up 2% today alone.

What's this guy saying?

No, but the shareholders do, in the form of increased price per share.

Thompson

I think he's saying the latter.

I wouldn't sneeze at a free 1%, but I'm not convinced it would turn out as the analyst suggests.

Thompson

Yeah, I want Apple to jump on the dividend bandwagon. Just look what it's done for Microsoft....

I think he's saying that $4 billion in cash would be able to purchase Apple shares, where it would not be able to before. And that could drive the stock price up far more than 4%.

Yeah I want Apple to sell an Office suite, just look at what it's done for Microsoft.

Oh wait, that logic is crap.

This can't be correct. If so, then the value of all of the shares repurchased before the final one would have to be zero. Repurchased shares don't vanish. They are still shares of ownership. All that happens when a company buys its own shares is that the company owns them. The total number of shares remains the same. If Apple bought every share of AAPL today except one, that last remaining share would still be worth $388.

That's a misinterpretation of what the analyst is saying. He's just showing that the FCF is more than sufficient to cover the proposed dividend.

So many greedy people want to get their hands on Apple's cash reserves...

Wow ..! I agree on every point you made. Not often I can say that here on AI

Except we're talking about service providers, not manufacturers. You can buy a PA Semi and easily export the chips anywhere. You can't buy a Sprint or Comcast and provide service in India, China, or anywhere else. Once you start going down this path, you'd wind up dropping a whole lot more coin to build/buy operators in every country to keep the strategy going.

This is the same idiot that has been screaming for a dividend for YEARS, one of the funds he's attached to owns a shitload of shares so he wants a dividend, that's all there is to it. Every couple of quarters he tries to stir up the pop and get press on it. I'm a long time share holder and I am perfectly happy with my several hundred percent return.

Nope, it is correct. The company owns the non-circulating shares, but the 1 remaining share owns the company and so owns all the non-circulating shares as well.

Wait, you're not greedy? In that case I'm sure you won't mind sending me $1000. Or are you greedily holding on to your money? Just like we all do.

Dream on. Apple isn't going to be a carrier. AT&T and Verizon wouldn't look to kindly at that.

You forgot to mention the part where existing users whose purchases net Apple $300-400 per computer will switch to those cheaper options as well. Net for Apple - must sell 10 computers to earn the profit that a single one does today. Michael Dell, is that you posting under an assumed name?


See above.


You haven't been paying much attention, have you?


Now that sounds good. Totally unimportant to Apple's bottom line, but it seems like an easy thing to do.


Again, I think you've missed the last 5 years entirely. Some pretty amazingly bad ideas.

If that's what he's saying, fine. But then, perhaps you can explain this sentence:

How does a "dividend payout reduce free cash flow?"

Jobs wanted it to be one. Screw the telecoms.

Some readers seem to be forgetting that Apple is a for-profit corporation. Although it's also a great institution which has advanced the state-of-the-art in computing and consumer electronics, created inspiring products, and empowered individuals the world over, its ultimate mission is to make money for its owners -- the shareholders. Thus the relevant question is this: What course of action would provide shareholders with the biggest return on investment?

Yes, Apple's cash gives it lots of advantages that enhance the stock price. As others have pointed out, Apple can use the cash to grow its business (by opening more stores, for instance), and to secure steady supplies of components. But Apple is already doing these things, and still the cash keeps growing; in fact, these uses have barely made a dent in the avalanche of profit now flowing into the company's coffers.

Today the cash reserves have reached such epic proportions that many investors, like myself, have a lot of difficulty imagining what in the world Apple could possibly use it all for. If Apple's management can't figure out how to use the money either then it won't benefit shareholders just sitting there; the excess should be spent on stock buybacks, or distributed as dividends, or both.

Exceptional people like Steve Jobs, rest his soul, often have a few irrational quirks, and the tendency to hoard Apple's cash was one of them. So I'm with Brian Marshall on this one; now that Jobs has sadly passed, I see Apple starting to issue regular dividends in the next year or two. It would be the reasonable thing to do.

No, they don't, in reality.

Let's use rough numbers. Apple's market cap is $360 B or $388 per share (or whatever it is today). That value INCLUDES the value of the cash held by the company. One way to look at it is to say that the shares are $300 per share net of cash.

Now, if you take $2 B and distribute it to the shareholders, the total value of the stock drops by $2 B. So you're not really adding anything in value. There IS a perception of greater value in that you'll receive dividends, but investors who are more sophisticated than this analyst (which is apparently anyone except most of the people posting here) realizes that all you've done is converted part of the cash value per share into cash for the shareholder. So each individual shareholder doesn't gain anything (when you figure that Apple would have to pay taxes to repatriate the money and the shareholder also pays taxes on the dividend.

It's a crazy idea.


Please educate yourself on how shares work.

The price per share is the TOTAL perceived value of the company divided by the number of shares outstanding. If the company buys back all the shares but one, the remaining share is equal to the total perceived value of the company divided by the one remaining share.

Now, it gets a little complicated because buybacks are generally with cash. So, at the same time that you're reducing the number of shares in circulation, you're also reducing the cash on hand - and therefore the market cap. When you do the math, a share buyback using cash on hand could actually reduce the total market cap. Think of the company value as "intrinsic value" plus "cash". The intrinsic value doesn't change, but the "cash" value decreases. If ALL The cash were used to buy shares, the market cap would (theoretically) drop to the intrinsic value.

Using Apple's figures, current Market Cap is $360 B. Cash is $80 B (or whatever). So total market cap is $280 B. If the $80 B were used to buy back shares, the market cap would drop to $280 B. Price per share would probably go up, but possibly not as much as the proportional number of shares taken out of circulation (thus resulting in a lower market cap).

Now, the reason my example doesn't work is that Apple doesn't have enough cash to buy every share but one. If they did, my conclusion would be correct - that one remaining share would be worth the entire value of the company. However, the actual dollar figure I assigned was wrong. That one remaining share would be worth $280 B (the intrinsic value of the company) because all of the $80 B would be spent buying shares.

Obviously, the math doesn't work. By the time Apple had bought a large fraction of the shares, the price per share would be astronomical, so Apple could never buy every share but one.

Let's be civil, shall we? I know how shares work.

I see a flaw in your reasoning, and I'll use round numbers to demonstrate it. Suppose a company has 10 shares outstanding and a market cap of $100. Each share is worth $10. Now imagine the company buys 9 of the shares. They'll sink $90 into the purchase and the value of that last share of stock is still $10, because the company as a whole is still worth $100.