Originally Posted by bokap
Can someone explain how dividends are determined. If Apple pays 3% dividend, is it 3% of what?
Dividends can be based on anything and calculated any way you wish. You could, for example, (as one company I know did) pledge to distribute 50% of free cash flow in dividends. However, since the article talks about 'dividend yield', that has a very specific meaning. Dividend yield is dividend divided by share price.
Originally Posted by Red Oak
I understand the argument of don't fix something that is not broken. But, a 3% dividend @ $500 share ($15/share) would be about $14 billion dollars per year payout. Apple is projected to generate another $70+ billion in cash this year
So, even if they did a 3% dividend, Apple cash balance could grow to: $100 + ($70- $14 dividend) = $156 billion by end of year
Above all, Apple senior management needs to make sure they have the capital to execute their game plan. It's worldwide and it is on a massive scale, as they are essentially building out the world's computing and mobile platforms for the next 20 years. Only they really know the plan and the need for the cash
That is the most sensible thing anyone has posted. (Wu's suggestion of a $70-80 B dividend is crazy.)
In the end, management has to make a decision as to how much cash they need to keep on hand for strategic purposes and safety net. Once they have more cash than that, they have to make an assessment of what to do with the cash. That could include acquisitions, share buybacks, or dividends. So far, there hasn't been any signs of acquisitions that could use any significant percentage of the cash. If cash continues to grow by 30-40% per year, they'll need to do something - and that might include share buybacks or dividends. Dividends require repatriation of cash and will therefore have tax consequences. Depending on where the share buybacks occur, they might or might not.
There are also acquisitions besides companies, btw (their pre-payment for components is one example). Perhaps they're planning to buy Bora Bora so that they can run their corporate offices free from local regulations and in a sunny climate where they can get free solar energy.
In the end, no one outside of Apple's board room knows what their plans are so it's impossible to say when they reach the point where they have 'too much' cash.
Originally Posted by kaiser_soze
As is often the case, many of the comments I read here are so stupid as to boggle my mind.
Apple is a publicly traded company. The only appropriate action to take, with respect to that pile of case, is to use it in the way that stockholders want it to be used, in the best interest of the stockholders. There is virtually unanimous opinion among analysts, whose opinions closely reflect the opinions of stockholders, that Apple needs to pay a dividend.
No need to go any further. There is absolutely no evidence whatsoever that analysts reflect the opinions of stock holders. Nor is there any legal mechanism for the Board to pay any attention to analysts. The only thing you stated correctly is that the stock holders eventually control Apple. But they don't do that by voting on what they want (other than limited circumstances). Instead, they do that by electing board members to represent them. The BOARD decides what Apple does with its cash, not analysts.