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Quarterly dividend expected to expand Apple's shareholder base

post #1 of 57
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With a higher-than-expected 1.8 percent yield, Apple's new $2.65 quarterly dividend is expected to expand its shareholder base to investors who previously passed on the stock because it did not pay out a dividend.

Analyst Gene Munster with Piper Jaffray noted on Monday that Apple's quarterly dividend represents an annual yield of about 1.8 percent, which is slightly higher than other big cap tech companies. He believes most on Wall Street were expecting Apple to offer a dividend with an annual yield closer to 1.5 percent.

"While the dividend has been widely expected, we believe that the dividend will make AAPL viable to a broader base of shareholders," Munster wrote in a note to investors on Monday.

In addition to the dividend, which Apple announced on Monday, the company is also initiating a $10 billion share repurchase program, representing about 2 percent of total shares outstanding. Together, the dividend and buyback are expected to cost Apple about $45 billion over the next three years.

Munster estimates that Apple will generate about $70 billion in operating cash flow in its fiscal year 2013, with 40 percent of that coming from the U.S. Excluding the dividend and buyback, he still expects Apple to generate between $11 billion and $13 billion in U.S. cash in the 2013 fiscal year.

"While some investors may have wanted some more visibility into future increases in the dividend, we believe the dividend achieves the main goal of expanding AAPL's share holder base," he said. "Given Apple will still be generating significant net cash, we believe the dividend could increase by 20% after the first year."


The growth trajectory of Apple's cash hoard, via Asymco.


Apple executives did indicate to analysts in a conference call that the new program will be reviewed "periodically." He said there will not be a set timetable for reviewing the dividend amount or share buyback program.

Munster also said on Monday that he still believes Apple sold more than one million iPads on last Friday's launch day, including pre-orders. He expects a slight upside to Wall Street's expectations of 10.2 million iPad sales in the March quarter.

Apple declined to reveal specific iPad sales figures on Monday, though Apple Chief Executive Tim Cook did say it was a record launch, and that he was "thrilled" with the initial response. AT&T also indicated that Friday was a record day for iPad activations and sales for the carrier.

[ View article on AppleInsider ]
post #2 of 57
How is paying a dividend helping Apple? It's not like they need extra capital to invest. It's also not true that Apple's successful last decade is because of the shareholders.

I like to see 1998 as a reset.
post #3 of 57
Quote:
Originally Posted by aToMac View Post

How is paying a dividend helping Apple? It's not like they need extra capital to invest. It's also not true that Apple's successful last decade is because of the shareholders.

I like to see 1998 as a reset.

Paying a dividend could result in longer stock retention. Wouldn't that increase it's stability?

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post #4 of 57
Quote:
Originally Posted by aToMac View Post

How is paying a dividend helping Apple? It's not like they need extra capital to invest. It's also not true that Apple's successful last decade is because of the shareholders.

I like to see 1998 as a reset.

How is having $100B in the bank helping Apple?
post #5 of 57
Quote:
Originally Posted by SolipsismX View Post

Paying a dividend could result in longer stock retention. Wouldn't that increase it's stability?

Maybe, but it doesn't matter. The fact is, owners of stock are entitled to a share of the company's profits, and Apple now has more money than they could ever need in the bank. That money should go to the shareholders, rich and poor, because they own the company.
post #6 of 57
Quote:
Originally Posted by SolipsismX View Post

Paying a dividend could result in longer stock retention. Wouldn't that increase it's stability?


Apple's one and only responsibility is to earn money for the shareholders. If they pay a dividend the shareholders earn money and theoretically the stock price goes up due to the demand for stock that pays a dividend, hence shareholders earn more money. Plus the stock buy back also increases the price per share as it increases demand by decreasing supply and also signals that the financial officers and upper management view the stock as under valued. Overall the new programs should increase shareholder wealth.

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post #7 of 57
Quote:
Originally Posted by SolipsismX View Post

Paying a dividend could result in longer stock retention. Wouldn't that increase it's stability?

Since the dividend I'll be receiving will represent a 20% annual return on my investment in AAPL I will definitely be retaining my shares!
post #8 of 57
It's not like apple can't do anything now that they are offering a buyback and dividend. They are still sitting on billions of dollars.
There really isn't anything you couldn't buy with 60 billion that you could of bought with 100 billion.
post #9 of 57
Quote:
Originally Posted by cameronj View Post

How is having $100B in the bank helping Apple?

Steve Jobs learned the hard way and almost saw the company burned to the ground. The second time around he made sure that they have their own insurance in the form of a war chest. Apple may be riding high now, but only a few years ago analysts were claiming the likes of Motorola, RIM and Nokia as huge winners in the mobile space. So don't call Apple a winner, it can be a curse to be successful. The 100 billion is security. That is how it benefits the shareholders.

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post #10 of 57
Makes me kinda regret my 25% sell-off when it hit $500, but on the other hand, I am now playing with the house's money. Its not a 'gain' until you sell.
Happy to still be in for 75%.
My question now is whether or not to re-invest the dividends. Not a slam-dunk decision.
post #11 of 57
Quote:
Originally Posted by cameronj View Post

The fact is, owners of stock are entitled to a share of the company's profits...

There is a difference between issuing a dividend because it behooves Apple's goal and issuing a dividend because "owners of stock are entitled to a share of the company's profits." show me any law that states stock holders are entitled to anything more than the value of their share value.

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post #12 of 57
Quote:
Originally Posted by tenzo View Post

It's not like apple can't do anything now that they are offering a buyback and dividend. They are still sitting on billions of dollars.
There really isn't anything you couldn't buy with 60 billion that you could of bought with 100 billion.

perhaps not a single item sure. but if you were looking to buy a chuck of factories, land, fund a scholarship for engineers etc to run the place etc, losing $40Billion could slow down those plans

Which is why I think that Apple is doing what they are doing. They would have looked at the various options, perhaps have been for a couple of years, and tried to find the ones that wouldn't really change the game much in the long run. These would be what they feel fit that bill. It might mean that they can only set up 3 factories and not all 5 that they want right off, but they might believe that is okay because they will gain back the money over the next couple of years and it will still be there when they are actually ready to start work on factories 4 and 5. No real loss.

And the positive PR they get from this, meager though it perhaps seems for many shareholders, will be invaluable.

And I think Mr Munster will be surprised when it turns out that Apple sold 1 million iPads this week just in the US. The iPad 2 launch weekend was something like 600k and there are more stores in the US than last year, so they can reach more folks just with Apple locations. And you have all those folks that didn't update to the iPad 2 which was like 300k just on that launch weekend. Plus an easy 300k more that have the iPad 2 and are updating that. it's not a stretch to think that 400k folks are finally impressed with the iPad 3 and bought it either for personal use, work or school or a combo. or that businesses didn't get in on the game as well. I would say 750k on the lower end
post #13 of 57
Quote:
Originally Posted by mstone View Post

Steve Jobs learned the hard way and almost saw the company burned to the ground. The second time around he made sure that they have their own insurance in the form of a war chest. Apple may be riding high now, but only a few years ago analysts were claiming the likes of Motorola, RIM and Nokia as huge winners in the mobile space. So don't call Apple a winner, it can be a curse to be successful. The 100 billion is security. That is how it benefits the shareholders.

As large as $100 billion is it's not that much when Apple is spending several percent of that on a single comment investment. Add to the fact that it's paying that out from cash in likely one country you have a much smaller purse to pull from.

Perhaps no one but Dr. M recalls but I was against Apple issuing dividends because I didn't think they had a large enogh cushion for a modern tech company. Last Autumn I determined Apple's US holdings and projected growth made it feasible. From what I can tell Apple's war chest will continue to grow, not shrink, just at a slower percentage rate than before.

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post #14 of 57
Quote:
Originally Posted by mstone View Post

Apple's one and only responsibility is to earn money for the shareholders..

It's amazing how many people seem to forget this.
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post #15 of 57
Quote:
Originally Posted by charlituna View Post

And the positive PR they get from this, meager though it perhaps seems for many shareholders, will be invaluable.

One thing alot of people fail to mention with this is that the stock now has yield support. (It may be little but it is still there). Should help make some of the shorters out there think twice about shorting this stock now. IMHO
post #16 of 57
Quote:
Originally Posted by mstone View Post

Apple's one and only responsibility is to earn money for the shareholders.

Is that accurate? I thought the goal was to increase its value which is why companies decide to go public in the first place. Earning money for its shareholders is a causal relationship to further increase it's value.

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post #17 of 57
Quote:
Originally Posted by mstone View Post

Apple's one and only responsibility is to earn money for the shareholders.

Perhaps in a pure, capitalist sense, that is true. But what I think Apple realizes is that their one and only responsibility is to make "insanely great" products. If you make products that are insanely great, and delight and wonder people, chances are the rest (money for shareholders) will follow.

Tech companies that are too focused on making money for shareholders squander their assets and consumer goodwill by relentlessly focusing on the bottom line. They make ill-advised purchases of other companies and let their corporate board drive the company, all the while only looking at the next earnings statement. Perhaps the greatest example of this is HP, which is a total trainwreck of a company I have lost all respect for. Everything they make that I have touched recently, you can feel that drive to make money for the shareholders.
post #18 of 57
Where are people getting the only 60M left in the war chest figure from?

First of all, the dividend won't be given out until Q4. And considering that Apple is going to make at least 9B this quarter and even more in subsequent quarters since q2 is traditionally weak. Apple's war chest will actually be getting bigger. But instead of growing $16B per quarter like the previous quarter, they will only grow $13B due to dividend and buyback. It would not surprise me if Apple will hit the 200B cash mark sometime in late 2013.
post #19 of 57
Quote:
Originally Posted by debaserm3 View Post

Perhaps in a pure, capitalist sense, that is true. But what I think Apple realizes is that their one and only responsibility is to make "insanely great" products. If you make products that are insanely great, and delight and wonder people, chances are the rest (money for shareholders) will follow.

Tech companies that are too focused on making money for shareholders squander their assets and consumer goodwill by relentlessly focusing on the bottom line. They make ill-advised purchases of other companies and let their corporate board drive the company, all the while only looking at the next earnings statement. Perhaps the greatest example of this is HP, which is a total trainwreck of a company I have lost all respect for. Everything they make that I have touched recently, you can feel that drive to make money for the shareholders.

Making great products are a means to an end. The goal is still to increase profit. The difference between Apple and other companies is that Apple cherishes buyer retention more than other companies which shows a difference in perception that focuses on the longterm instead of the short-term.


Quote:
Originally Posted by Vthree View Post

Where are people getting the only 60M left in the war chest figure from?

First of all, the dividend won't be given out until Q4. And considering that Apple is going to make at least 9B this quarter and even more in subsequent quarters since q2 is traditionally weak. Apple's war chest will actually be getting bigger. But instead of growing $16B per quarter like the previous quarter, they will only grow $13B due to dividend and buyback. It would not surprise me if Apple will hit the 200B cash mark sometime in late 2013.

Doing some very dirty mental calculations I'd be surprised if they drop below $100 billion.

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post #20 of 57
Quote:
Originally Posted by SolipsismX View Post

Is that accurate? I thought the goal was to increase its value which is why companies decide to go public in the first place. Earning money for its shareholders is a causal relationship to further increase it's value.

Pretty much the same thing. Shareholder wealth is proportionate to company value. If you were to do as Mr. Dell once proposed, sell it and give the money back to the shareholders that is what you would hope to get. Your share of the actual value of the company. That is what happens in mergers and acquisitions, theoretically.

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post #21 of 57
Quote:
Originally Posted by SolipsismX View Post

As large as $100 billion is it's not that much when Apple is spending several percent of that on a single comment investment. Add to the fact that it's paying that out from cash in likely one country you have a much smaller purse to pull from.

Perhaps no one but Dr. M recalls but I was against Apple issuing dividends because I didn't think they had a large enogh cushion for a modern tech company. Last Autumn I determined Apple's US holdings and projected growth made it feasible. From what I can tell Apple's war chest will continue to grow, not shrink, just at a slower percentage rate than before.

That last part is what many seem to be missing in the reports I'm reading. Many are claiming this shows Apple think they have stopped growing and they will deplete their reserves. I think you are dead right, the war chest will still grow with a slight lowering of the incline in the graph, that's all.
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post #22 of 57
Quote:
Originally Posted by debaserm3 View Post

Perhaps in a pure, capitalist sense, that is true. But what I think Apple realizes is that their one and only responsibility is to make "insanely great" products. If you make products that are insanely great, and delight and wonder people, chances are the rest (money for shareholders) will follow.

Once a company becomes public, it does not matter what they do to earn money so long as they do. The 'insanely great' part is just a marketing concept, which helps them earn money. Why do you think they always try to drive the price of the components to absolute rock bottom and make compromises to do that? To earn more money. Plain and simple.

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post #23 of 57
Quote:
Originally Posted by digitalclips View Post

That last part is what many seem to be missing in the reports I'm reading. Many are claiming this shows Apple think they have stopped growing and they will deplete their reserves. I think you are dead right, the war chest will still grow with a slight lowering of the incline in the graph, that's all.

Apple is going to spend $15 billion per year but how much are they going to profit each year for the next 3 years? There profit for CY2011 is as follows: $5.99 billion, $7.31 billion $6.62 billion $13.06 billion, for a total of $32.98 billion. That's net profit!

Even if we were to foolishly assume Apple's profit will be flat for that next 3 years their "war chest" would see a growth of $98.94 billion - $45 billion for a net increase of $53.94 for a total around $165 billion.

But let's be realistic, Apple is growing and will continue to grow rapidly even if you use a conservative measure.

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post #24 of 57
Quote:
Originally Posted by mstone View Post

Pretty much the same thing. Shareholder wealth is proportionate to company value. If you were to do as Mr. Dell once proposed, sell it and give the money back to the shareholders that is what you would hope to get. Your share of the actual value of the company. That is what happens in mergers and acquisitions, theoretically.

I think they are very distinct.

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post #25 of 57
Quote:
Originally Posted by debaserm3 View Post

Perhaps in a pure, capitalist sense, that is true. But what I think Apple realizes is that their one and only responsibility is to make "insanely great" products. If you make products that are insanely great, and delight and wonder people, chances are the rest (money for shareholders) will follow.

Tech companies that are too focused on making money for shareholders squander their assets and consumer goodwill by relentlessly focusing on the bottom line. They make ill-advised purchases of other companies and let their corporate board drive the company, all the while only looking at the next earnings statement. Perhaps the greatest example of this is HP, which is a total trainwreck of a company I have lost all respect for. Everything they make that I have touched recently, you can feel that drive to make money for the shareholders.

I think Steve Jobs would agree 100%. If he wanted to have done a dividend, he would have done it by now.

He always said the main purpose of Apple was to make insanely great products. (Sorry for the redundancy). The profit was always secondary. It was never about money to him.

I work for a company in a shrinking marketplace, and cut-throat competition, with shrinking profit margins. What is our strategy? We're chancing high profit margins. Which means we will eventually become extinct.

I guess my point is, we need to ask ourselves, what would Steve do? Even though he said for us to NEVER to do that......

Typing this on my rocking iPad 3 BTW. Love it.
post #26 of 57
Quote:
Originally Posted by Maecvs View Post

I think Steve Jobs would agree 100%. If he wanted to have done a dividend, he would have done it by now.

He always said the main purpose of Apple was to make insanely great products. (Sorry for the redundancy). The profit was always secondary. It was never about money to him.

Really? Please point me to the link for reference on that SJ quote that he always said.

One thing that was part of Steve's genius is that he personally had a passion for the work he was doing, but at the same time he understood that his primary fiduciary responsibility as CEO was to do what was best to ensure the company's success financially as well.

It was not his personal purpose to earn money for himself by working at Apple but it is actually against the law for him not to act in accordance with reasonable expectations in a responsible manner since he was serving at the pleasure of the BOD and the primary reason they asked him to serve is to make Apple successful financially not just to win a popularity contest.

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post #27 of 57
Quote:
Originally Posted by SolipsismX View Post

I think they are very distinct.

My understanding is limited in these areas so I would be interested to learn from your perspective.

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post #28 of 57
Let me officially register my dissatisfaction ith this decision.
post #29 of 57
Quote:
Originally Posted by Buzzz View Post

Let me officially register my dissatisfaction ith this decision.

The AI rumor forum has duly noted your dissatisfaction and it is officially registered.

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post #30 of 57
Quote:
Originally Posted by mstone View Post

Really? Please point me to the link for reference on that SJ quote that he always said.

One thing that was part of Steve's genius is that he personally had a passion for the work he was doing, but at the same time he understood that his primary fiduciary responsibility as CEO was to do what was best to ensure the company's success financially as well.

It was not his personal purpose to earn money for himself by working at Apple but it is actually against the law for him not to act in accordance with reasonable expectations in a responsible manner since he was serving at the pleasure of the BOD and the primary reason they asked him to serve is to make Apple successful financially not just to win a popularity contest.

It would take a while to find it.

Perhaps it's in the isaacson biography.
post #31 of 57
Quote:
Originally Posted by Maecvs View Post

It would take a while to find it.

Perhaps it's in the isaacson biography.

I looked around for a few minutes but all I could find that was even close was:

1998 in the midst of IBM's sweeping success with the PC and overtaking Apple, Steve said to his engineers "The Mac has to be insanely great", but I don't think it was being stated with the philosophic idealism you inferred. It was basic survival at that point in time and it didn't really work out all that well for them.

Also
At Pixar he said to his animators. "Make it Great!"

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post #32 of 57
It hasn't even been a year since Steve Jobs passed away, and already they are going against his will.

Steve Jobs is why they have that close to $100 billion in the first place. They should be doing everything he would have done.

On the other hand, he wasn't a banker and either am I, so...
post #33 of 57
Quote:
Originally Posted by chronster View Post

It hasn't even been a year since Steve Jobs passed away, and already they are going against his will.

Steve Jobs is why they have that close to $100 billion in the first place. They should be doing everything he would have done.

On the other hand, he wasn't a banker and either am I, so...

What kind of bizarre logic is that? Was he elected God-emperor?

He was a very effective CEO, but his greatest legacy will be the team that he built - a team that could think for itself. In fact, IIRC, he encouraged Cook to think for himself rather than simply ask 'what would Steve do?'
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post #34 of 57
Quote:
Originally Posted by mstone View Post

My understanding is limited in these areas so I would be interested to learn from your perspective.

Just what I said before that benefiting the shareholders is a result of making the company more profitable.


Quote:
Originally Posted by mstone View Post

I looked around for a few minutes but all I could find that was even close was:

1998 in the midst of IBM's sweeping success with the PC and overtaking Apple, Steve said to his engineers "The Mac has to be insanely great", but I don't think it was being stated with the philosophic idealism you inferred. It was basic survival at that point in time and it didn't really work out all that well for them.

Also
At Pixar he said to his animators. "Make it Great!"

WWDC 1997: "I'm a product guy. I believe if you build great products, people will respond to that. And I can tell you, we are working on some great products."

But he's said it time and time again that they want to make the best products possible and products that they want to use.

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post #35 of 57
With Apple, whether there is a real or just imagined difference in why they do what they do, they are different than many of the other tech companies their products compete against. And for many investors, especially those on the Street, Apple's unwillingness to play by the rules that their competition did (as far as dividends go), has kept Apple from their investment graces.

I'm sure it wasn't just Steve making the decision to build their war chest - and it was a critical thing to do, to enable them to make advanced purchases and investment in technology that pushed them ahead with both the iPhone and iPad.

But at some point (that point being today), sitting on all that cash stops making financial sense. Paying dividends and stock buy back will give the Street what they want and at this point, baring some disaster with the iPad, iPhone, Apple Television, MacBook's, iTunes, etc, chances are pretty great that we'll be having the conversation again that they've got too much cash on hand and either they will need to pay greater dividends, make some strategic acquisitions or perhaps buy into manufacturing.

Holding out this long may have the effect of even faster growth and higher share value, given they will clearly be on more investor's buy list.
post #36 of 57
Quote:
Originally Posted by chronster View Post

It hasn't even been a year since Steve Jobs passed away, and already they are going against his will.

Yep, because it's certainly law.

Quote:
Steve Jobs is why they have that close to $100 billion in the first place. They should be doing everything he would have done.

As technology changes, you can't possibly give an example of what he would have done.

He himself said that he doesn't speculate beyond 'about five years out' because even he couldn't predict some of the things that had happened.

Oh, that just that's not gonna make the forums a

The bad news: the haters get to say "THAT'S NOT WHAT STEVE WOULD HAVE DONE!" for the next five years.

The good news: the haters ONLY get to say "THAT'S NOT WHAT STEVE WOULD HAVE DONE!" for the next five years.

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post #37 of 57
Quote:
Originally Posted by jragosta View Post

What kind of bizarre logic is that? Was he elected God-emperor?

He was a very effective CEO, but his greatest legacy will be the team that he built - a team that could think for itself. In fact, IIRC, he encouraged Cook to think for himself rather than simply ask 'what would Steve do?'

UMMM, I'd say his greatest legacy would be turning Apple completely around. His team might be great, but if they AREN'T asking "what would Steve do?" then they are going to get off track, and away from what made Apple all that money in the first place.

It's not bizarre logic, and for you to find it as such is actually bizarre in itself.
post #38 of 57
Quote:
Originally Posted by Tallest Skil View Post

Yep, because it's certainly law.



As technology changes, you can't possibly give an example of what he would have done.

He himself said that he doesn't speculate beyond 'about five years out' because even he couldn't predict some of the things that had happened.

… Oh, that just… that's not gonna make the forums a…

The bad news: the haters get to say "THAT'S NOT WHAT STEVE WOULD HAVE DONE!" for the next five years.

The good news: the haters ONLY get to say "THAT'S NOT WHAT STEVE WOULD HAVE DONE!" for the next five years.

What are you talking about "the haters"?

Here's the bad news: You're a deluded _____ who wants to argue for the sake of arguing. Notice how you conveniently left out my last sentence that would blow a COMPLETE hole in the argument you're trying to present here?

Let me get it for you so you don't forget: "On the other hand, he wasn't a banker and either am I, so... "

So I'm not sitting here bashing Apple, or bashing Cook. All I'm saying is this is going against something Steve Jobs would have done, and I'd hate to see Apple make that a habit. I'm also admitting Jobs could have been wrong on this one as a result of not being a total expert on the details.

Jesus Christ man, just ____ off. You're such a god ____ troll it's unbelievable. Get a life
post #39 of 57
Quote:
Originally Posted by chronster View Post

It hasn't even been a year since Steve Jobs passed away, and already they are going against his will.

Steve Jobs is why they have that close to $100 billion in the first place. They should be doing everything he would have done.

On the other hand, he wasn't a banker and either am I, so...

Where is your proof that this isn't what Steve would have done? Perhaps Steve was waiting to see how the iPad sales were shaping up after the 3rd generation (I think it could be Apple's most profitable arm in a couple years) and/or for Apple to reach a point that they could feasibly do a buyback and dividend without risking the cash cushion they have built up.

The point of the "war chest" is to have cash when you need it and this comparatively paltry payout will continue to grow that "war chest" and increase the stock value.

I think it's more likely that Jobs is the one that initiated the effort to determine when it would most valuable to the company to do a buyback, dividend and stock split.

"There is no rule that says the best phones must have the largest screen." ~RoundaboutNow

 

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"There is no rule that says the best phones must have the largest screen." ~RoundaboutNow

 

Goodbyeee jragosta :: http://forums.appleinsider.com/t/160864/jragosta-joseph-michael-ragosta

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post #40 of 57
Quote:
Originally Posted by jragosta View Post

What kind of bizarre logic is that? Was he elected God-emperor?

He was a very effective CEO, but his greatest legacy will be the team that he built - a team that could think for itself. In fact, IIRC, he encouraged Cook to think for himself rather than simply ask 'what would Steve do?'

You are correct jragosta, Jobs built a deep bench.

But I'm assuming you are not happy with their decision to issue a dividend?

You have been pretty outspoken with you negative thoughts on a dividend. You have compared AAPL to MSFT on more then one occasion, are you going to sell your AAPL shares now?
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