Dividend seen bringing $4B additional investment dollars to Apple

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Comments

  • Reply 61 of 86
    thomprthompr Posts: 1,511member
    Quote:
    Originally Posted by alphajack7 View Post


    How is the divided bringing $4 billion of new investment dollars to Apple?



    1. Apple issues $4 billion of new shares? With no dilution?



    2. Or the dividend is paid and the demand for Apple stock increases so the market cap goes up $4 billion?

    From $360 billion to $364 billion? Or about 1% increase? Apple is up 2% today alone.



    What's this guy saying?



    I think he's saying the latter.



    I wouldn't sneeze at a free 1%, but I'm not convinced it would turn out as the analyst suggests.



    Thompson
  • Reply 62 of 86
    Yeah, I want Apple to jump on the dividend bandwagon. Just look what it's done for Microsoft....
  • Reply 63 of 86
    cameronjcameronj Posts: 2,357member
    Quote:
    Originally Posted by thompr View Post


    I think he's saying the latter.



    I wouldn't sneeze at a free 1%, but I'm not convinced it would turn out as the analyst suggests.



    Thompson



    I think he's saying that $4 billion in cash would be able to purchase Apple shares, where it would not be able to before. And that could drive the stock price up far more than 4%.
  • Reply 64 of 86
    cameronjcameronj Posts: 2,357member
    Quote:
    Originally Posted by cincytee View Post


    Yeah, I want Apple to jump on the dividend bandwagon. Just look what it's done for Microsoft....



    Yeah I want Apple to sell an Office suite, just look at what it's done for Microsoft.



    Oh wait, that logic is crap.
  • Reply 65 of 86
    chabigchabig Posts: 640member
    Quote:
    Originally Posted by jragosta View Post


    It doesn't work that way. As they buy up shares, the remaining shares increase in value. Apple's current market cap is $360 B. If they bought every share but one, the remaining share would be worth $360 B (in theory).



    This can't be correct. If so, then the value of all of the shares repurchased before the final one would have to be zero. Repurchased shares don't vanish. They are still shares of ownership. All that happens when a company buys its own shares is that the company owns them. The total number of shares remains the same. If Apple bought every share of AAPL today except one, that last remaining share would still be worth $388.
  • Reply 66 of 86
    Quote:
    Originally Posted by anantksundaram View Post


    This analysis is a joke.



    Dividends have nothing -- repeat, nothing -- to do with free cash flow. Free cash flow is a firm's operating cash flow net of its investing cash flow, without consideration of any financing or payout effects.



    That's a misinterpretation of what the analyst is saying. He's just showing that the FCF is more than sufficient to cover the proposed dividend.
  • Reply 67 of 86
    jr_bjr_b Posts: 64member
    So many greedy people want to get their hands on Apple's cash reserves...
  • Reply 68 of 86
    MacProMacPro Posts: 19,322member
    Quote:
    Originally Posted by jragosta View Post


    Absolutely wrong.



    On paper, stock splits SHOULD be irrelevant, but there's plenty of evidence that some types of stocks do better after splits. Prices of several hundred dollars per share scare off small investors and reduce your investing pool.







    I don't think any long term Apple investors are crying about the return on their investment.







    That's certainly one option - and might make some sense, particularly on the dips.







    It doesn't work that way. As they buy up shares, the remaining shares increase in value. Apple's current market cap is $360 B. If they bought every share but one, the remaining share would be worth $360 B (in theory).







    Apple's not going there.







    They're not ignoring the cheapskate market. That's what the iPad and iPod Touch are for.



    Notebook and desktop for under $500? Not a chance. In order to do that profitably, they'd have to make too many compromises and end up selling a junk product - which would merely tarnish their brand.



    They're not going to accept 20% margins, either.







    They're not going to license iOS to competitors. Just not going to happen. More phone models? Sure - as they come up with configurations where the sacrifices don't make it too much like a POS Android phone.







    There has been plenty of speculation on that one and it could happen - if Apple can find a way to make it work well.







    Since when has Apple been playing defense? Have you been sleeping for the past 15 years?





    Wow ..! I agree on every point you made. Not often I can say that here on AI
  • Reply 69 of 86
    Quote:
    Originally Posted by Sammy Davis View Post


    I think something similar could have been said at one time about processor manufacturers. And retail establishments.



    Recall Apple got lucky AT&T was desperate enough to hand over control to Apple on those first iphones...



    The argument would be that a carrier (not Sprint) would provide Apple with a way to market its television product as an integrated solution. you turn it on and it works. Recall that while recuperating from liver transplant surgery, Steve Jobs called the CEO of Comcast to tell him that his HD product sucked...



    Cellular companies ARE like utilities ... and these pipes become quite valuable when there are capacity constraints.



    If you are going to reinvent television...maybe do away with television networks...you better have the bandwidth on hand to transmit all that stuff turnkey. You already know about the issues regarding how much pipe is required by just Netflix and how the carriers want to stick it to Netflix users....this is going to be people watching HDTV all day!...



    Can Apple reinvent television while relying on the current carriers to just pass the data through?



    Except we're talking about service providers, not manufacturers. You can buy a PA Semi and easily export the chips anywhere. You can't buy a Sprint or Comcast and provide service in India, China, or anywhere else. Once you start going down this path, you'd wind up dropping a whole lot more coin to build/buy operators in every country to keep the strategy going.
  • Reply 70 of 86
    This is the same idiot that has been screaming for a dividend for YEARS, one of the funds he's attached to owns a shitload of shares so he wants a dividend, that's all there is to it. Every couple of quarters he tries to stir up the pop and get press on it. I'm a long time share holder and I am perfectly happy with my several hundred percent return.
  • Reply 71 of 86
    tjwaltjwal Posts: 404member
    Quote:
    Originally Posted by chabig View Post


    This can't be correct. If so, then the value of all of the shares repurchased before the final one would have to be zero. Repurchased shares don't vanish. They are still shares of ownership. All that happens when a company buys its own shares is that the company owns them. The total number of shares remains the same. If Apple bought every share of AAPL today except one, that last remaining share would still be worth $388.



    Nope, it is correct. The company owns the non-circulating shares, but the 1 remaining share owns the company and so owns all the non-circulating shares as well.
  • Reply 72 of 86
    cameronjcameronj Posts: 2,357member
    Quote:
    Originally Posted by jr_b View Post


    So many greedy people want to get their hands on Apple's cash reserves...



    Wait, you're not greedy? In that case I'm sure you won't mind sending me $1000. Or are you greedily holding on to your money? Just like we all do.
  • Reply 73 of 86
    tbelltbell Posts: 3,146member
    Dream on. Apple isn't going to be a carrier. AT&T and Verizon wouldn't look to kindly at that.



    Quote:
    Originally Posted by ConradJoe View Post


    My guess is that Apple is going to own Sprint within the next few years.



    Sprint bet the company, and incurred more debt to Apple than was wise. My guess is that all that debt is secured with first-priority security interests in all of Sprints assets. Sprint may well run into liquidity problems and be unable to pay its debts as they become due. Apple is in a perfect position to swoop in and cut a deal with the Trustee.



    I've not seen anybody else express this guess. Have any of you guys?



  • Reply 74 of 86
    cameronjcameronj Posts: 2,357member
    Quote:
    Originally Posted by ssls6 View Post


    1) Launch a $500 notebook & desktop, pocket around $100 per sku. Stop ignoring this market.



    You forgot to mention the part where existing users whose purchases net Apple $300-400 per computer will switch to those cheaper options as well. Net for Apple - must sell 10 computers to earn the profit that a single one does today. Michael Dell, is that you posting under an assumed name?



    Quote:

    2) Add phone models to the lineup or license I0S to select makers, pocket about $50 per sku. Allow the partner to use the A5 or whatever to help drive down costs. Position the phones under your flagship, using old models for you "no-cost" option isn't a great strategy.



    See above.



    Quote:

    Make the industry work for you not against you.



    You haven't been paying much attention, have you?



    Quote:

    3) Expand Apple TV to include apps and Siri, put a mic in the simple remote. There are already apps to control cable, satellite receivers.



    Now that sounds good. Totally unimportant to Apple's bottom line, but it seems like an easy thing to do.



    Quote:

    Once you've thrown down a challenge, you must play offense and defense....defense alone will not do it.



    Again, I think you've missed the last 5 years entirely. Some pretty amazingly bad ideas.
  • Reply 75 of 86
    Quote:
    Originally Posted by eldoon View Post


    That's a misinterpretation of what the analyst is saying. He's just showing that the FCF is more than sufficient to cover the proposed dividend.



    If that's what he's saying, fine. But then, perhaps you can explain this sentence:

    Quote:
    Originally Posted by AppleInsider View Post


    In Marshall's view, a dividend payout would reduce Apple's free cash flow by between 20 percent and 25 percent.



    How does a "dividend payout reduce free cash flow?"
  • Reply 76 of 86
    Quote:
    Originally Posted by TBell View Post


    Dream on. Apple isn't going to be a carrier. AT&T and Verizon wouldn't look to kindly at that.



    Jobs wanted it to be one. Screw the telecoms.
  • Reply 77 of 86
    Some readers seem to be forgetting that Apple is a for-profit corporation. Although it's also a great institution which has advanced the state-of-the-art in computing and consumer electronics, created inspiring products, and empowered individuals the world over, its ultimate mission is to make money for its owners -- the shareholders. Thus the relevant question is this: What course of action would provide shareholders with the biggest return on investment?



    Yes, Apple's cash gives it lots of advantages that enhance the stock price. As others have pointed out, Apple can use the cash to grow its business (by opening more stores, for instance), and to secure steady supplies of components. But Apple is already doing these things, and still the cash keeps growing; in fact, these uses have barely made a dent in the avalanche of profit now flowing into the company's coffers.



    Today the cash reserves have reached such epic proportions that many investors, like myself, have a lot of difficulty imagining what in the world Apple could possibly use it all for. If Apple's management can't figure out how to use the money either then it won't benefit shareholders just sitting there; the excess should be spent on stock buybacks, or distributed as dividends, or both.



    Exceptional people like Steve Jobs, rest his soul, often have a few irrational quirks, and the tendency to hoard Apple's cash was one of them. So I'm with Brian Marshall on this one; now that Jobs has sadly passed, I see Apple starting to issue regular dividends in the next year or two. It would be the reasonable thing to do.
  • Reply 78 of 86
    jragostajragosta Posts: 10,473member
    Quote:
    Originally Posted by thompr View Post


    No, but the shareholders do, in the form of increased price per share.



    Thompson



    No, they don't, in reality.



    Let's use rough numbers. Apple's market cap is $360 B or $388 per share (or whatever it is today). That value INCLUDES the value of the cash held by the company. One way to look at it is to say that the shares are $300 per share net of cash.



    Now, if you take $2 B and distribute it to the shareholders, the total value of the stock drops by $2 B. So you're not really adding anything in value. There IS a perception of greater value in that you'll receive dividends, but investors who are more sophisticated than this analyst (which is apparently anyone except most of the people posting here) realizes that all you've done is converted part of the cash value per share into cash for the shareholder. So each individual shareholder doesn't gain anything (when you figure that Apple would have to pay taxes to repatriate the money and the shareholder also pays taxes on the dividend.



    It's a crazy idea.



    Quote:
    Originally Posted by chabig View Post


    This can't be correct. If so, then the value of all of the shares repurchased before the final one would have to be zero. Repurchased shares don't vanish. They are still shares of ownership. All that happens when a company buys its own shares is that the company owns them. The total number of shares remains the same. If Apple bought every share of AAPL today except one, that last remaining share would still be worth $388.



    Please educate yourself on how shares work.



    The price per share is the TOTAL perceived value of the company divided by the number of shares outstanding. If the company buys back all the shares but one, the remaining share is equal to the total perceived value of the company divided by the one remaining share.



    Now, it gets a little complicated because buybacks are generally with cash. So, at the same time that you're reducing the number of shares in circulation, you're also reducing the cash on hand - and therefore the market cap. When you do the math, a share buyback using cash on hand could actually reduce the total market cap. Think of the company value as "intrinsic value" plus "cash". The intrinsic value doesn't change, but the "cash" value decreases. If ALL The cash were used to buy shares, the market cap would (theoretically) drop to the intrinsic value.



    Using Apple's figures, current Market Cap is $360 B. Cash is $80 B (or whatever). So total market cap is $280 B. If the $80 B were used to buy back shares, the market cap would drop to $280 B. Price per share would probably go up, but possibly not as much as the proportional number of shares taken out of circulation (thus resulting in a lower market cap).



    Now, the reason my example doesn't work is that Apple doesn't have enough cash to buy every share but one. If they did, my conclusion would be correct - that one remaining share would be worth the entire value of the company. However, the actual dollar figure I assigned was wrong. That one remaining share would be worth $280 B (the intrinsic value of the company) because all of the $80 B would be spent buying shares.



    Obviously, the math doesn't work. By the time Apple had bought a large fraction of the shares, the price per share would be astronomical, so Apple could never buy every share but one.
  • Reply 79 of 86
    chabigchabig Posts: 640member
    Quote:
    Originally Posted by jragosta View Post


    Please educate yourself on how shares work.



    Let's be civil, shall we? I know how shares work.



    I see a flaw in your reasoning, and I'll use round numbers to demonstrate it. Suppose a company has 10 shares outstanding and a market cap of $100. Each share is worth $10. Now imagine the company buys 9 of the shares. They'll sink $90 into the purchase and the value of that last share of stock is still $10, because the company as a whole is still worth $100.
  • Reply 80 of 86
    jragostajragosta Posts: 10,473member
    Quote:
    Originally Posted by chabig View Post


    Let's be civil, shall we? I know how shares work.



    Obviously, you don't since you think that if Apple buys back every share but one that the remaining share would be worth $388. It would actually be worth the entire value of Apple Inc.



    Quote:
    Originally Posted by chabig View Post


    I see a flaw in your reasoning, and I'll use round numbers to demonstrate it. Suppose a company has 10 shares outstanding and a market cap of $100. Each share is worth $10. Now imagine the company buys 9 of the shares. They'll sink $90 into the purchase and the value of that last share of stock is still $10, because the company as a whole is still worth $100.



    You're horribly confused.



    The only thing that I wasn't clear on is that my evaluation should have been based in INTRINSIC VALUE plus remaining cash rather than total value. It is basically the same thing when looking at current values. But after all the money has been used to buy shares, the numbers change.



    Let's take your example. Assume that your company has 10 shares. The intrinsic value of the company is $100. The company also has $90 in cash. Current share price is $10.00. You convince 9 of the share holders to sell their shares back to the company for $10 (again, unrealistic). That means that the company has taken back 9 shares, leaving one in circulation. The intrinsic value is unchanged at $100, but the cash is all gone. The net company value is therefore $100, so the price for the one outstanding share is $100, not $10.



    Now, it could never really apply like this because let's say you bought 4 of the shares for $10 each. The value of the remaining shares would be $25 (market cap would be $100 intrinsic value plus the $50 in cash remaining for a total value of $150, but only 6 shares remain so the price would be $25 each. There wouldn't be enough money to buy all of them. This is why when a company wants to acquire another company, they work out a deal in advance to buy all the shares (or a controlling interest). Buying up shares on the market drives up the price to the point that a company would end up having to pay considerably more than the market value.



    Now, in the case of Apple, the INTRINSIC value of the company is around $280 B ($360 B market cap less $80 B cash). If Apple were somehow able to buy all the shares but one with their $80 B cash (obviously, not possible), the one remaining share would be worth $280 B.
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