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Apple gearing up to pay out $2.5 billion in dividends on Thursday

post #1 of 99
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Flush with billions in cash it simply can't spend fast enough, Apple has begun the process of issuing its first quarterly dividend to shareholders in 17 years.

Apple announced its plans for a new dividend program in March, alongside a $10 billion share buyback program. Each quarter, the company stated it will pay its shareholders a $2.65 per share dividend.

Shareholders of record as of Monday August 13 will be paid dividends on Thursday, the company has announced.

Apple's chief executive Tim Cook noted that the company has "used some of our cash to make great investments in our business through increased research and development, acquisitions, new retail store openings, strategic prepayments and capital expenditures in our supply chain, and building out our infrastructure. You?ll see more of all of these in the future.

?Even with these investments," he added, "we can maintain a war chest for strategic opportunities and have plenty of cash to run our business. So we are going to initiate a dividend and share repurchase program."

Can't spend fast enough to make a dent

Over the next three years, Apple has stated that its buyback and dividend plans will distribute $45 billion from its cash pile. Across the company's 935 million outstanding shares, the quarterly dividend will amount to nearly $2.5 billion in payments to investors each quarter.

In the most recent June quarter, however, Apple announced the accumulation of an additional $7 billion in cash, so the payment of $2.5 billion in dividends will not reduce Apple's cash hoard, nor even stop it from growing past its current height at $117 billion.

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


Apple has likely earned nearly twice as much new cash in the first seven weeks of its new quarter than it will be paying out as a dividend for the previous one. Apple will pay out a second dividend in November, and continue paying new quarterly dividends about a month and a half after the end of each subsequent quarter.

A dividend equivalent will also be paid to holders of Apple's restricted shares, although Cook has declined to collect dividend payments for the 1.125 million shares of restricted stock he has been granted, which would otherwise be worth over $75 million.

The company's current dividend payment rate is quite modest when compared to its current and future cash position. At the same time, Apple's $2.5 billion in quarterly dividend payments makes it one of the highest dividend payers in the U.S.

Shareholders pay income taxes on dividends, but not much

Shareholders only pay a federal capital gains income tax on any stock appreciation when they sell their securities, but Apple's new quarterly dividend incurs income tax as it is paid out. This year, however, that tax rate remains extremely low.

Following the Bush Tax Cuts, tax payers in the lowest 10 and 15 percent brackets (individuals earning less than $35,000 in taxable income) pay nothing in long term capital gains tax, while higher earners pay just 15 percent on the profits any shares they sell in 2012 (if they've held the stock for at least one year).

Tax rates are the same for qualified dividend payments; lower brackets pay nothing while those in higher tax brackets pay a flat 15 percent tax rate on any dividend income. This means an individual earning more than $35,000 pays considerably more in taxes for earned income from labor or most other sources (at least 25 percent, currently up to 35 percent) than an investor pays on cash distributions they receive as dividends or share appreciation capital gains (15 percent).

This disparity between the very low federal tax rates on dividends or stock appreciation income and the much higher taxes that workers pay has resulted in criticism from even the very wealthy.

Billionaire investor Warren Buffett famously noted that he pays a lower tax rate on his investment income than his secretary pays in income taxes. The White House has jumped on this "Buffett Rule" to recommend that high income individuals should return to paying standard tax rates from the 1990s on their investment income and dividends.

The historically low federal tax rates for investment income are set to automatically expire at the end of this year, but Congress is virtually guaranteed to extend the cuts, and is currently only arguing over whom, if anyone, should be excluded from the huge tax breaks, based on their income.

U.S. President Obama has floated plans to extend the Bush Tax Cuts only for individuals earning income of $200,000 or less. That would allow the capital gains tax for higher income individuals to rise back to 20 percent, while dividend payments would be taxed at the same bracket as other income, up to a new 39.6 percent bracket for those earning more than $390,000.

The Democratically controlled Senate passed Obama's tax cuts for individuals making less than $200,000, while the Republican controlled House has passed a full extension of the status quo; the two will have to negotiate a plan to avoid the tax cuts from expiring automatically at the end of the year. The cuts were last extended two years ago at the end of 2010.
post #2 of 99

Can somebody buy AAPL on monday, collect the dividend on Thursday and then sell the stock on Friday?

 

I've never held a dividend stock before. $2.65 per share doesn't seem like a whole lot though, to be honest. Somebody can make that per share in a few minutes, just trading AAPL on any given green day.

post #3 of 99

Thank you Scamsung ! 

post #4 of 99
Quote:
Originally Posted by Apple ][ View Post

Can somebody buy AAPL on monday, collect the dividend on Thursday and then sell the stock on Friday?

 

I've never held a dividend stock before.

yes, but why would you sell?  You get less than 3 dollars or less than .5%

post #5 of 99

Why not just have Samsung cut the checks?

post #6 of 99
Quote:
Originally Posted by Apple ][ View Post

Can somebody buy AAPL on monday, collect the dividend on Thursday and then sell the stock on Friday?

 

I've never held a dividend stock before. $2.65 per share doesn't seem like a whole lot though, to be honest. Somebody can make that per share in a few minutes, just trading AAPL on any given green day.

Yes. Minus two commissions to your broker and income taxes. Assuming it will be worth more when you sell it than when you bought it. Do the math to see if it is worth it.

 

Edit: BTW Welcome back from your vacation.

Life is too short to drink bad coffee.

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Life is too short to drink bad coffee.

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post #7 of 99
Quote:
Originally Posted by Just_Me View Post

yes, but why would you sell?  You get less than 3 dollars or less than .5%

I know that the dividend amount is tiny, I was just wondering about the rules regarding dividend stocks.

post #8 of 99

Well you would need a time machine to go back to Monday. 

 

Plus, you'd be hit with short term capital gains taxes on your stock's appreciation. AAPL is up about $13 this week, so you'd pay 15% tax on your $2.65 dividend but standard bracket rates on the ~ $13. To keep more of your capital gains, you have to hold the stock for at least a year. But then you'd risk the possibility that Congress might fail to extend the tax cuts for the rich, meaning you'd end up paying regular bracket tax rates (closer to 35%) on a year's worth of capital gains. 

 

Of course, you'd still be making money, you'd just not be getting a free ride via the Bush Tax Cuts. And probably not enough money to pay for that time machine. 

post #9 of 99
Quote:
Originally Posted by mstone View Post

Yes. Minus two commissions to your broker and income taxes. Assuming it will be worth more when you sell it than when you bought it. Do the math to see if it is worth it.

I wasn't planning on selling anything, and certainly not because of any microscopic dividend. I was just curious. Thanks for the reply!

post #10 of 99
Quote:
Originally Posted by Apple ][ View Post

Can somebody buy AAPL on monday, collect the dividend on Thursday and then sell the stock on Friday?

 

I've never held a dividend stock before. $2.65 per share doesn't seem like a whole lot though, to be honest. Somebody can make that per share in a few minutes, just trading AAPL on any given green day.

 

There is no money to make trading the dividend x date.  1st the date you had to own Apple to get the dividend was not the 13, but before the close on 8th.  So if you own Apple before the close on the 8th you get 2.65$ per share. Actually, the dividend "snapshot" happen at the open on the 9th and at the same time the stock price automaticly drop by the amount of the dividend.  So the stock dropped by exactly 2.65$ at the open on the 9th, so there is no trade that will give you a free lunch even if you can trade in the after hours. You could sell the stock on the 9th and still get the dividend when its paid, you only need to own the stock at the X-date to get the dividend.  The Apple x-date was the 9th at the open.

 

The same goes for option premiums, the dividend amount is calculated in the calls and the puts and there is no way to gain anything on that side either. The only proven strategy with dividends is to exercices a deep in the money call before the X date. The thing is the premium on those calls is so low the dividend premium doesnt adjust correctly to compensate the dividend.  We are talking pocket change here unless you trade large amounts (20+ millions)


Edited by herbapou - 8/14/12 at 12:06pm
post #11 of 99
Quote:
Originally Posted by Apple II View Post

Can somebody buy AAPL on monday, collect the dividend on Thursday and then sell the stock on Friday?

I've never held a dividend stock before. $2.65 per share doesn't seem like a whole lot though, to be honest. Somebody can make that per share in a few minutes, just trading AAPL on any given green day.
No, there are holding period requirements to be eligible for the qualified dividend tax benefit.

http://www.irs.gov/pub/irs-pdf/p564.pdf

$2.65 per quarter is a 1.7% yield. Some investors prioritize income over growth. AAPL is definitely a growth stock, no doubt about that, it would not be a total choice for investors who are looking for large payouts. AT&T (T) yields 4.4%, Frontier (FTR) yields 8.8%, Windstream (WIN) yields 10% for comparison.

herbapou has provided some examples of how the market adjusts for the dividend payout. There's no free lunch by quick trades trying to game the dividend ex-date.
post #12 of 99

A pathetic development for what has always been a growth stock - another proof that Cook is terrible visionary.

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post #13 of 99
Quote:
Originally Posted by brlawyer View Post

A pathetic development for what has always been a growth stock - another proof that Cook is terrible visionary.

Jobs didn't want to pay out any dividend whatsoever, feeling that shareholder return was provided by growing the company. Am I to understand that you also believe Steve Jobs was a terrible visionary?

 

By the way, 30-40% margins on products is precisely because Cook is a visionary.

post #14 of 99
Quote:
Originally Posted by Apple ][ View Post

Can somebody buy AAPL on monday, collect the dividend on Thursday and then sell the stock on Friday?

 

I've never held a dividend stock before. $2.65 per share doesn't seem like a whole lot though, to be honest. Somebody can make that per share in a few minutes, just trading AAPL on any given green day.

 

Originally Posted by AppleInsider View Post

Flush with billions in cash it simply can't spend fast enough, Apple has begun the process of issuing its first quarterly dividend to shareholders in 17 years.
Shareholders of record as of Monday August 13 will be paid dividends on Thursday, the company has announced.

 

Does this mean that if somebody sold their shares today on Tuesday, they'll still be receiving a dividend on Thursday?

 
 
 
post #15 of 99
Quote:
Originally Posted by focher View Post

Jobs didn't want to pay out any dividend whatsoever, feeling that shareholder return was provided by growing the company. Am I to understand that you also believe Steve Jobs was a terrible visionary?

 

By the way, 30-40% margins on products is precisely because Cook is a visionary.

 

No, I agree with SJ 100% - did you read my post? He never agreed with dividends, Cook does...is this clear for you?

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post #16 of 99

WTF is this doing in this story?

 

 

Quote:

This disparity between the very low federal tax rates on dividends or stock appreciation income and the much higher taxes that workers pay has resulted in criticism from even the very wealthy. 

 

Dilger doing his usual bang up job of inserting his own bias into every post. Nice.

Proud AAPL stock owner.

 

GOA

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Proud AAPL stock owner.

 

GOA

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post #17 of 99

It would be a more interesting chart to graph what cash/cash equivalents are in the US vs. what is held in foreign accounts.
 

   Apple develops an improved programming language.  Google copied Java.  Everything you need to know, right there.

 

    AT&T believes their LTE coverage is adequate

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   Apple develops an improved programming language.  Google copied Java.  Everything you need to know, right there.

 

    AT&T believes their LTE coverage is adequate

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post #18 of 99
I'm pretty sure someone has done that, just use your favorite search engine, but it's bound to be one of those Apple finance bloggers.

Apple's cash should be about three-quarters held off shore, maybe even more.
Edited by cvaldes1831 - 8/14/12 at 12:25pm
post #19 of 99
Quote:
Originally Posted by brlawyer View Post

 

No, I agree with SJ 100% - did you read my post? He never agreed with dividends, Cook does...is this clear for you?

Ah, I misread it. I thought you were criticizing the size of the dividend. Another read makes it clear.

 

It still doesn't change that a dividend has no real impact. Apple has a practical problem in that it can't sit on so much cash (which is increasing) forever. I fundamentally agree that Apple is in the best position to put that cash to the best business use but, as Apple hasn't shown any inclination to make big acquisitions (which is smart), the number of options is running out. Paying out a small amount through a dividend is actually not going to address the basic issue - they are earning more than they can spend. For a publicly held company, that's a situation that needs to be addressed at some point.

post #20 of 99
Quote:
Originally Posted by brlawyer View Post

 

No, I agree with SJ 100% - did you read my post? He never agreed with dividends, Cook does...is this clear for you?

 

The only reason SF didnt want to pay dividends is he lived the Apple near death experience in the 90's.  He wanted Apple to have a enough cash reserve to survive no matter what.  Since Apple pays less dividends it actually earns, the dividend has no impact whatsoever on Apple operations and R&D.

 

The growth in stock price is no insurance a stock owner is getting its reward because you dont make any gain until you sell.  The dividend is profit coming out while retaining the same amount of shares.  Lets assume someone buy's 100 shares of Apple at 5$ in 2000. Then lets assume Apple crash and burn in 2020 and Apple goes back to 5$ share. The share holder didnt made a dime. But with dividends, the same share holder would had made a lot of cash because it would had received some of the company profits between 2000 and 2020.

 

A lot of investors are accumulating dividend stocks because they dont want to follow the market on a day to day basis.  They buy dividend stocks that beats bonds rates and they are in business. There is a huge market for income funds and with Apple paying a dividend it allow those funds to buy Apple stocks, which in turn rise the stock price. With Apple market cap, is getting harder to rise the stock price, so dividend may be the only way to make profit at some point.


Edited by herbapou - 8/14/12 at 12:29pm
post #21 of 99
Quote:
Originally Posted by SpamSandwich View Post

WTF is this doing in this story?

 

 

 

Dilger doing his usual bang up job of inserting his own bias into every post. Nice.

 

Exactly, what does the large section on taxes have anything to do with Apple paying a dividend?  

 

Capital Gains taxes are not just "taxes on the rich".   Everyone pays the same rate on capital gains.  I am not rich, but I am saving and investing money for retirement and I do have to pay capital gains taxes on dividends too.   Don't forget that the money I earned and saved to invest for retirement was already taxed once as income at the higher rate for income, and then it is double-taxed when it earns dividends.

 

The US government encourages taxpayers to invest for retirement by allowing 401K's, IRAs and other means to shelter income from taxes.  And that is good, because counting on social security to pay for everything is pretty short-sighted and unrealistic.  

post #22 of 99

Oh f'ing please. It's a growth stock that is highly manipulated and kept down.

post #23 of 99

Must this article parrot a talking point of one particular party? One of the reasons that the 2003 tax cuts reduced the dividend rate was to eliminate the disparity between dividends and capital gains. The economic argument is that the corporation already pays taxes (up to 35%), so it makes sense to reduce the taxes that individuals pay on the dividends they receive from corporations. Otherwise, corporate earnings would effectively be taxed at up to 70%. As a result of the tax cuts, many individuals pay no taxes on dividends while others pay 15%. Those rates are the same that one would pay by selling the stock at a gain. The idea behind reducing the dividend rate was to encourage companies to pay dividends rather than stockpile cash, so that the cash could go back into the economy.
 

post #24 of 99
Quote:
Originally Posted by ChiA View Post

 

 

Does this mean that if somebody sold their shares today on Tuesday, they'll still be receiving a dividend on Thursday?

 
 
 

 

It depends on if it was sold ex-dividend. If yes, then yes, the "old" owner will receive the dividend. If no, then the "new" owner would receive the dividend, but the selling price would reflect that fact. The market knows how to handle these kinds of things.

post #25 of 99
Quote:
Originally Posted by msimpson View Post

 

Everyone pays the same rate on capital gains

 

That particular fact is not true. And yet it's a very common belief even among people in the finance field. But capital gains rates are tiered just like regular income tax rates. 

post #26 of 99
Quote:
Originally Posted by SpamSandwich View Post

WTF is this doing in this story?

 

 

 

Dilger doing his usual bang up job of inserting his own bias into every post. Nice.

I agree. This doesn't belong. But since it came up, the disparity, is intentional. Investors get a break on capital gains because it encourages investment and they are, after all, taking risk. My employer pays my income without risk. When I invest, I win some and I lose some.

post #27 of 99
don't forget that this is not apple's first dividend. for seven years, while steve was gone, they paid a quarterly dividend.

http://investor.apple.com/dividends.cfm
post #28 of 99
Quote:
Originally Posted by brlawyer View Post

 

No, I agree with SJ 100% - did you read my post? He never agreed with dividends, Cook does...is this clear for you?

 

At some point 'growth' hits the ceiling of large numbers, and a P/E less than 20 is an artifact of that.   If you can't invest the money in the bank, and you're getting <1% Return on Cash, you're not stewarding your owner's money effectively.   evolving to paying a dividend gives you 3 things as a stockholder.

 

1) income

2) increased interest in your stock, in that large funds that have income requirements will now recognize you as a component qualifier

3) cash to buy more Apple Stock ( or diversify into smaller companies).

 

You may say 'buy some other company.'   I think it's hard to buy a company for > 10B, that aligns with Apple's core values and business plan.  Big doesn't mean good.  HP buying EDS, and now writing off over 8Billion is an example of that.  Apple buys small (<1B), and only when they are extremely strategic (PA Semi, LiquidMetal, Siri, Poly9&C3), and not just to pad the revenue streams (which makes the AuthenTec deal intriguing).

 

Having 1/6th of your value in Cash (and growing) just seems to be a waste of capital.  If Apple can't spend it to grow the company, it should spend it (in Dividends) to entice income investors into the mix.

 

I agree with not splitting the stock, not going whole hog and buying back stock to prop value (buying back stock to increase employee ownership is differend), and not 

 

 

I still think the best thing to do is create a Apple Bank and link it to ITMS. Why pay transaction fees, when you can be a bank?

post #29 of 99

Wow I'm surprised at all these dividend questions from Apple fanboys.  I recommend you learning how to invest rather than learning about dividends through the worst stock to get dividends from.  There are much better stocks to 'buy and sell' just to get the dividend.  You can probably earn the same (or better) on capital gains by day trading AAPL any given day.
 

post #30 of 99

Convenient.... this will just about pay for my new iPhone next month.  :)

post #31 of 99
Quote:
Originally Posted by KPOM View Post

...the corporation already pays taxes (up to 35%)...

lol.gif lol.gif lol.gif lol.gif lol.gif lol.gif lol.gif lol.gif  

post #32 of 99
Quote:
Originally Posted by brlawyer View Post

A pathetic development for what has always been a growth stock - another proof that Cook is terrible visionary.

Wow.  What incredible cynicism.  Since the beginning of this year (2012), AAPL is up 55.9% (as of today's closing), with all of this growth done on Tim Cook's watch.  Hmmm.  Tell me, brlawyer, how many shares of AAPL do YOU own right now?  That is, what skin do you presently have in this game?  I have 5700 shares and will be earning (at minimum) $60,420 a year in dividends---while the stock grows like crazy (for at least the next 15 months, I'd wager).  Funny, but it always seems that those who have only their opinions to fall back on have the loudest voices about what Apple should do with OTHER PEOPLE'S MONEY.  Remember, the $117 Billion + in Apple's coffers does not belong to them.  It is ours, the shareholders, and unless Apple plans to buy the entirety of the WinTel empire--in cash-- anytime soon, I want some of that money back.

post #33 of 99
Quote:
Originally Posted by Apple ][ View Post

Can somebody buy AAPL on monday, collect the dividend on Thursday and then sell the stock on Friday?

 

I've never held a dividend stock before. $2.65 per share doesn't seem like a whole lot though, to be honest. Somebody can make that per share in a few minutes, just trading AAPL on any given green day.

Typically, the expected value of that strategy, in an efficient market, is zero. The stock trades down mechanically at an ex-dividend price (http://www.investopedia.com/terms/e/ex-dividend.asp#axzz23YOQl7Lg) to reflect the money that left the company.

post #34 of 99
Quote:
Originally Posted by SpamSandwich View Post

WTF is this doing in this story?

 

 

 

Dilger doing his usual bang up job of inserting his own bias into every post. Nice.

Yeah, I was wondering the same thing. Halfway through, it started to read like political propaganda....

 

But on the plus side, I did not notice any usual AI-style typos or grammatical errors, so I'll go with the flow... lol.gif

post #35 of 99

deleted


Edited by MacRulez - 1/21/13 at 3:03pm
post #36 of 99
Quote:
Originally Posted by Apple ][ View Post

Can somebody buy AAPL on monday, collect the dividend on Thursday and then sell the stock on Friday?

 

I've never held a dividend stock before. $2.65 per share doesn't seem like a whole lot though, to be honest. Somebody can make that per share in a few minutes, just trading AAPL on any given green day.

The stock will be worth more per share before the dividend date than it will after.  Investors are not dumb, they will realize the value of the stock went down after the dividend and take it down accordingly.

post #37 of 99

I can not wait for my first of many checks, can not retire on them but ever little bit counts.

 

For those who do not understand how this all works, first you have to be a holder of the stock for a longer period of time than a few days before an after other wise people would all try to buy and sell dividend stock before and after the dividend payout day all the time. If you only hold it for part of the period you get a prorated dividend. Also for those who think the stock drops equal to the dividend pay out that is not always true, some drop more and others continue to go up as you are seeing with Apple, not only are they paying a dividend your based investment continues to grow. Personally I like the stock that drop and maybe drop a lot as they pay out the dividend since I usually re-invest those dividend and I can buy at a lower cost and let the money ride. Apple stock price is not fully base on the money in the bank so their pay out has not really reflection on the value of the stock.

 

I personally have other investment that continue to pay dividend and the value of the investment continue to grow so you have to know the investment since they all do not react the same way

 

Also, to get the tax break you have to hold it more than a year otherwise the dividend will be treated as ordinary income and taxed according.

post #38 of 99
Quote:
Originally Posted by elmsley View Post

Wow I'm surprised at all these dividend questions from Apple fanboys.  I recommend you learning how to invest rather than learning about dividends through the worst stock to get dividends from.  There are much better stocks to 'buy and sell' just to get the dividend.  You can probably earn the same (or better) on capital gains by day trading AAPL any given day.
 

True, but you have to factor in the price you paid for apple, in may case it was very lows so the return on invested capital with these dividend is pretty nice return on top of the unrealize capital gains. To you point it not worth buying apple at $600+ to reap a $2+ dividend. There are investment at $10+ per share paying 10%+ in dividends a years. So if you want a very good return on you money do not buy apple at this point. Apple is priced for the guy who have millions of $ to invest in one shot and can ride the ups and down and get a few extra $ in dividends on top of that.

post #39 of 99
What is the largest quarterly dividend a company has paid out? This seems pretty high. Note, I'm talking about a quarterly dividend not a one time dividend, but I'll take any info on the subject.

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post #40 of 99

Stuck with billions they can't spend fast enough eh?  They are more than welcome to pay off my debt.  Out soccer stadium seats 24,000 people.  My debt is less than that.  

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