Originally Posted by jragosta
Not me. A dividend does not historically increase the share price of a growth stock. For example, look at the big Microsoft one-time dividend a year ago. The share price dropped by almost exactly the amount of the dividend.
And Microsoft's share price growth has been far lower than Apple's - and MS offers a dividend and Apple does not. There's no evidence that a dividend increases the share price of growth stocks - and people like Warren Buffet are staunchly opposed.
Those are bad examples as well. MS's stock has languished because investors don't see them as moving up the ladder anymore. Their growth has been modest for a growth stock and has been slowing over time. Their stock is up this year because there is unbounded hope that Win8 will change the way MS works and that growth will restart.
MS's big one time dividend was a way back. That was about $33 billion, and was given, not because the stock was doing well, but because it wasn't. It was a strong demand by investors. The situation with Apple is very different. With Apple, the cash is increasing at such a quick rate, that it's too much. I don't know how you feel about vast amounts of cash when the company can't really use it. But, it's sitting there doing little.
I would agree, if you're saying it that a dividend would more likely raise the share price than a one time disbursement. But I think that even a disbursement in this case would raise the share price. As many financial people are now saying, Apple is different from other companies. And it is. That's not fanboyism either. Apple is a cash generation machine like no other. As it grows, it will throw off cash at ever increasing rates.
It will affect the stock price positively, because investors will think that owning the stock will give them a good chance of getting more dividends, or another distribution. This distribution would only be a one time thing like the Great War was the war to end all wars—until the next one came.
The situation is that with Apple generating so much cash, another distribution would become necessary after some time, if a fairly large divident wasn't established, and increased on a regular basis.
That's not at all true. A large one-time dividend causes a drop in share price roughly equal to the value of the dividend. If it's an ongoing dividend, there's no evidence that dividends are correlated with share price. Some of the fastest growing stocks (Berkshire Hathaway and AAPL, for example) do NOT pay dividends.
But feel free to provide evidence to support the claim that a dividend generally increases share price.
See the above, and I think that you should provide evidence that in the case of Apple, your statements would be true. MS is a very different company from Apple, and the lessons learned there, financially, needn't apply here. All the reasons would be different, and you must take that into account.
Not quite true.
They pay taxes in local currency on money earned in other countries. If they repatriate the money, they pay taxes based on US tax rates - BUT they get to deduct the amount paid on foreign countries. So, in effect, if they want the money back in the U.S., the total tax rate they pay will be US tax rates, so there's no double taxation.
I'm not sure that's entirely true. I've read that the tax rate would be more than that for various reasons. But even if it were true, it's still complex. Apple and other companies rarely pay the full rate because of R&D, and other mediating reasons. How would this work out? The rate would still be higher than it would otherwise. We're talking about billions for any particular large company, possibly tens of billions.
Actually, you have it backwards.
A split is shuffling deck chairs. It has absolutely no impact on the ratios or the split-adjusted share price. Evidence is pretty clear that while a split might have a very short term benefit, that goes away quickly.
OTOH, a buy-back has a very real effect. There are 930 M shares in circulation right now. The per-share earnings are $X divided by 930 M. If Apple buys back 30 M shares, then the per-share earnings are $X divided by only 900 M, so earnings per share are increased - permanently.
Whatever multiple the investor uses will be based on the new share price, so the price would increase proportionally. That is, if they buy back 5% of the shares, the share price will increase approximately 5%.
Well, I can agree with that. But, there's little evidence that it would raise the price of the shares, because it rarely ever does, and when it does, it often gets wiped out again as the market moves around. After all, buybacks don't actually increase anything real. It's just an illusion.
Heh! You should have used the example of MS again because they've done a lot of buybacks, and all during that time, their stock trended downwards. Include inflation, and even With the recent quick rise, it's less than it was ten years ago.