2%-3% dividend suggested as best use of Apple's $100B in cash - Page 5

Most of it would be reinvested into Apple shares.

I am in general agreement with this!

Though... I read somewhere, after the last earnings call, that Apple Apple has provided for the taxes to repatriate some overseas $ in their earnings.

It may be that Apple will do this going forward -- as a cost of doing business.

I REALLY wish that people who don't understand finance would stop cluttering this (and other) forum(s) with their drivel.

The bolded is 100% wrong. The share value is a combination of the value of the cash and the investor's appraisal of the value of the underlying value of the business. If Apple has $100 in cash per share and the stock is trading at $500, then the investors consider the underlying business to be worth $400 per share.

Now, if you give away 50% of the cash as a dividend, the owner has $50 in cash and a share worth $450. The share price would drop by approximately the amount paid out in dividends. If it didn't work that way, you could create value by simply giving money away - which is absurd.


I never said any such thing. You claimed that the analysts were speaking for the shareholders. My statement is that they are two entirely unrelated groups. There may be some overlap, but analyst do not speak for the shareholders.


Even if that were true (it isn't, btw), it doesn't change the argument. The fact is that Apple has people who are responsible for finding the best use for the cash on hand. It doesn't matter if it's the board or the management. The people who are responsible for deciding what to do with the money have decided that the best use right now is to hold onto it.

Since those people (whether management or the board) have access to a great deal more information than anyone here, it is the height of arrogance to argue that they're wrong.

you think way too small.

Apple needs sovereignty.

I'm not sure who you think you are, except a guy that trolls this site and posts a bunch. But you should try reading "Security Analysis" by Graham and Dodd. Maybe then you could grasp how Fund Managers view a dividend payment, cash on a balance sheet and the impact they have on a share price.

Yikes talk about arrogance.

BTW The Board may very well be in agreement with paying a dividend after reaching $100bn in cash equivilants on the balance sheet. We should have some clarity on this by Feb. 23rd

Why the heck should I bother? You don't have any intelligent argument and everything you post is contrary to standard business practice. Even if you found one book which supports you (which you haven't done since you have't quoted anything that supports your claim), I've been an investor of enough money and run enough public companies that it's clear that your claims are wrong - and I gave the reasons.

By your logic, it makes absolutely no difference whether Apple has $100 B in the bank or nothing - or $100 B in debt, for that matter. Clearly, that is completely illogical and contrary to rationality.

Well there are lots of people here that obviously don't understand finance at all. I am not going to keep arguing with you, its a waste of time. btw I have a college degree in both IT and business administration and I work for a major bank on the ATM systems. So I think I know a thing or 2 about the subject.

But luckily for me, money talks and bullshit walks, so I will keep using my understanding of finance and turn in profits and you keep doing whatever you do...

Odd, Warren Buffett doesn't seem to agree with you.

In any case, there aren't many AAPL shareholders. As of late December 2011, there were 28,500 shareholders of record and 70+% were institutional investors.

If the guys at FMR, BlackRock, etc. wanted AAPL dividends, they would have elected a board of directors that supports such a move.

Your understanding of blue-chip investing is tragically comical.

I will point out that grossly undervalued AAPL blows doors on the S&P 500, and that has been the case for almost ten years.

In some realms, getting a prediction completely wrong is referred to as "Pulling a Wu"

Taxes. IIRC, dividends are taxed as unearned income, holding the stock and selling it after a set period of time is taxed by capital gains, often taxed at 20 points less.


You're saying the largest company in the US by market cap haven't maximized shareholder value?

Also, it's not all cash, only a small portion is - they are in a large part liquid assets, earning much better than the rate you suggest. It looks to me like they've invested the money pretty well.

Wow, Your out of control guy.

Where did I ever say cash on the balance sheet makes no difference?

The whole reason Apple can afford a dividend now is their pristine balance sheet, retained earnings generated in the US and their growing revenue stream.

You have on three different occasions made up something in your head and then claimed it was my POV.

I'm sorry I suggested you read Security Analysis, its not for you.

Don't let the FACTS get in the way of your opinions.

You do the same thing the fruit farmers do. You secretly hire illegals. And then you get slammed for that. Or you contract to hire prison labor (that you can pay like 25 cents an hour) and you get slammed for that.

Personally I like the idea of making welfare recipients work at least 12 hours a week at some kind of job to keep getting their benefits. These factories could be a place they could get a job.

dividends and long term gains are taxed at the same rate. 15%

Exactly.

Acquisitions or new product development would be better use for the money. How much does Sharp cost?

Awesome -- +1

it wont increase share holder value.

which is exactly what Apple is doing when not paying a dividend.

Whoa

"The corporation is there to return maximum value to the shareholders."

If true... When? How?

ROTFLMAO. I'm still waiting for your facts. So far, there's been nothing but your unfounded opinions - almost entirely wrong. You claimed (repeatedly) that Apple would increase shareholder value by giving a dividend. That is based on nothing but myth.

I don't know why I bother trying to educate obnoxious teenagers, but maybe you'll learn something.

Let's look at it factually and historically (instead of your insistence on appeals to authority - but you refuse to even provide quotes from your 'authority' that are useful).

A dividend can affect share price in two ways:
1. A dividend might have a psychological impact on the customer's perception of value. There are people who argue that customers would pay more for a dividend paying stock. OTOH, there are people who argue that customers would not pay as much because it would indicate that the company has run out of ideas for wisely investing the money. There is no science to predicting this - it comes down to opinion. It IS, however, possible to look at history. Consider Microsoft - historically Apple's main 'enemy'. In the 90's, Microsoft was not giving dividends. Shares were growing at double digit rates. Early this century, Microsoft started giving a dividend - and share prices have been stagnant or falling since then.

There is absolutely no financial rule that says that shares automatically go up if a company pays a dividend. Sometimes it works that way and sometimes it doesn't. In fact, one of the most successful investors of all time (Warren Buffett) doesn't believe that dividends increase shareholder value because he believes the company can better invest the money than the shareholder - and history has shown that to be right for Buffett and for Apple.

2. A dividend has an IMMEDIATE impact on the underlying value of the stock. When you take billions of dollars off the balance sheet, the value of the company (and therefore the stock) drops. This effect is usually minor, but what is being proposed for Apple is a $10-15 per share special dividend which is substantial. If you look for examples where companies offered this kind of special dividend, they almost always show a share drop roughly equal to the value of the dividend. For example, look at Microsoft for 2004 when they implemented a $3 per share special dividend. The day before the ex distribution date, the shares were at $29 and change. The day after, they were at $26 and change. The shares dropped by very close to the amount of the distributions - which is exactly what would happen if Apple gives a distribution.

The same thing happens with mutual funds all the time. Follow any mutual fund you choose. If they give out significant dividends (either as cash distributions or as dividend reinvestment), there is always a drop roughly equal to the distribution amount on the ex-distribution date.

So, history shows clearly that I am right. When a company or mutual fund gives out a large dividend, there is an immediate drop in the share price comparable to the dividend that they give out. In other words, you can't create value out of thin air by giving a dividend.

For the long run, dividends may or may not affect share price, but there's no way to predict. What we DO know is that Apple has been the greatest success story in creating shareholder value for the past decade (maybe for all time, but I'm not going to look it up). And they did it without a dividend. Unless someone can provide clear and convincing evidence that a dividend would increase shareholder value, Apple has no obligation to do so. And the people who are being paid to run the company don't agree with you.

Now, I do believe that at some point, Apple will have to either pay a dividend or buy back stock (with the latter being preferable for tax reasons). I don't see any investments on the horizon that make any sense. But even then, it will have an immediate negative impact on share price (as shown above) with some unknown impact on future share price.

What the whiners don't realize is that it's up to the Board and management to determine when, where, and how to do that.

If there were a simple formula to allow you to know exactly what the best thing to do was at any given time, then the board could be punished for not doing it. But, in reality, shareholders are hiring a board (and, indirectly, senior management) to run the company to maximize value. It is therefore up to the company's manager to decide what actions IN THEIR OPINION will maximize shareholder value.

If the shareholders don't agree, then they are free to elect different board members. Or, more directly, they're free to sell their stock and buy shares in companies that do offer dividends (maybe look at Microsoft which has been flat since it started offering dividends).

Ultimately, it's a pointless argument. People here don't know Apple's plans for the money and are therefore not in a position to know whether a dividend makes sense. All we know is that, at the present time, the people we hired to run the company do not think it is useful. That could, of course, change at any time. That's what happens when you buy stock in a company rather than running your own company.

Very well said!

Whomever this 'analyst' believes that he is or what grand crystal ball he's gazing into, but there is clearly only one word that can and should be used to describe this point of view - STOOPID.

syracuse, he has a point. I agree that jragosta can be confrontational (at times), but that is a good finance lecture he gave you..

As a shareholder, as I read some of these comments I tend to believe that those who don't want Apple to pay a dividend are really wanting the share price to go down so they have another buying opportunity. Everyone agrees if they don't issue a dividend or at least a stock split and announce that on Feb. 23, there will be sell off. But, wise shareholders who are truly long will want a big announcement on that date so their shares continue the current momentum. There are also trader trolls who promote negative things about this because they've shorted the stock and will make money from the lack of an announcement. Those kind aren't long investors.

Those young ones on here who think Apple will have less money to invest in new products if they issue a dividend have not taken into account the rise in share price it will cause which means even more money pouring into the company which will actually be more than the dividend they announce.

If they don't announce a dividend they must at least do a stock split. Either announcement are what is being expected, with caution, and will be a boost to investors and for the company, not to even speak of the huge amount of free news publicity they would achieve heading into the iPad 3 launch.

Apple should not diminish its cash hoard unnecessarily. At the same time Apple can also give out yearly or quarterly dividends to its shareholders without destroying its cash hoard. This suggestion might sound a bit of a paradox to many who do not think out of the box. How can Apple achieve such contradictory aims?

Simple, with such a big cash hoard Apple can do a lot of things that other companies could not dream of doing. Apple should buy a bank to manage its own investment. With the profits earned out of this investment Apple could distribute them as dividends to its shareholders. There you have it: Apple could have its cake and eat it too. Silent the pesky agitations of Wall Street and at the same time invade its banking turf. A bank that it can call its own will be a dividend-generating machine for shareholders, preserving its cash hoard for good opportunities to come.

A bank is always going to be a business that is relevant in any age. Businesses need loans to expand. A bank that is well managed and avoid stupid mistakes and risks that have nothing to do with banking ought to be an ongoing business. At normal times entering into the banking business is prohibitive and difficult. But this is not normal times: Many banks are in trouble because of excessive speculation and inane decision-making. So this is a great opportunity for Apple to enter into a new business cheaply when incumbents are at their weakest. With $5$10 billion Apple could buy a decent bank and then grow it. Avoid the big banks with liquidity and encumbrances problems. Employ the best brains in the industry and set the best standard of operations to guide them, and then leave them to work out the magic. This was what Steve Jobs did with Pixar! Apple could disrupt another business with its customary innovative flair.

If you have $100 worth of stock, a 3% dividend would pay you $3.00. If the share price increased to $200, then the 3% dividend would pay $6.00, and so on.

Interesting. I'm curious of your stock prediction track record, particularly for Apple. Do you have one publicly posted somewhere? Or do you at least have a historical or statistical argument to make your case? Also, I'd like a benchmark, by what percentage will the stock go down, to what confidence interval and for how long?


Whatever you think of the board, and however they've arrived at their decision, it seems to me that the ten years has been working extraordinarily well. It's unlikely that they'd accidentally manage themselves into becoming the most valuable company in the country.

Please see the detailed explanation I gave above. You clearly don't know what you're talking about.

As for the bolded portion, you are absolutely wrong. I am a shareholder and if Apple does decide to use excess cash, I would rather see it used as a stock buyback rather than a dividend for tax reasons. Beyond that, I do not presume to tell the board what to do with the money. When I invested in Apple stock and voted in annual proxies, I am giving the board the authority to do what they think is best. If I'm ever disappointed, I will sell my stock, but until then, they know more about the plans than I do, so I'm not going to second guess them.

Wow. From where do you financial geniuses pop up, all at once!?

That's a motherhood statement that many people spout but few either practice or believe. How many people really incorporate a company thinking about maximizing value to shareholders? How many, really? It's a necessary motherhood to say but it is neither true nor useful.

That actually is not how it really works. So we have two financial non-geniuses here.

I worked as a Managing Director for several large Investment Banks for over 20 years advising Hedge Funds Mgrs and Corporate CFOs. His opinions on finance were an eye opener.

I feel AAPL issuing a dividend and/or a stock buyback would be positive for shareholders. jragosta does not agree with me.

jragosta compared MSFT to AAPL, two entirely different companies and stocks IMO. I do not agree with him

I'm not here to argue, probably the vast majority of us are long AAPL and are quite happy with the results.

I'd rather just read articles on AI and leave those "perpetual posters or posers" keep up their nonsense.

Heaven help the people who relied on your guidance. I guess we now know who was responsible for the hundreds of billions of dollars in losses in the Financial industry over the past decade.


The difference, of course, is that I provided evidence and an explanation for mine. You provided nothing except your opinion and the title of a book. And if you want to use appeal to authority as your argument, Warren Buffett disagrees with you - and NO ONE would put you in his league.


Of course they're two different companies. But that doesn't mean that they don't react the same way to large distributions.

Note that I also pointed out that mutual funds have exactly the same behavior. When a mutual fund distributes a large amount of cash, the share price falls by almost exactly that amount on the ex dividend date. It happens all the time, both with stocks and mutual funds. A large distribution causes the share price to drop by roughly the amount of the distribution.

But feel free to show an example in history where a company has made a major cash distribution and saw the stock price rise from that. Just one example will do...


And I'd rather read articles without having the forums flooded with uneducated people like you who insist on posting fallacies.

Wow - I'm too lazy to try to figure out who's right, who's lecturing whom, etc. But you two sure have a lot of time for each other. With Valentine's Day coming up, have fun together!

Hint: the person who provides facts and figures and historical evidence is more likely to be right than the person who's just pulling things out of his rear.

How about we arm wrestle? LOL

Seriously, you really need to calm down.

I decided to check out some of your previous 3000+ posts. You must feel very alone since EVERYONE else is SO WRONG.

Poor jragosta

Long AAPL and all is good in my world.

I agree with that.

[rant self-deleted]