Apple may offer stock buyback or increased dividends this Spring, report says

Posted:
in AAPL Investors edited January 2014
With its cash pile growing and stock performance slumping, a report claims that Apple will initiate a share buyback program or issue increased dividends in an effort to mete out value to its investors.

Apple Holdings
Source: Quartz


Citing sources close to the issue, Quartz reported on Tuesday that Apple is looking to return some of its $137 billion cash hoard to AAPL investors, with the preferred method expected to be additional dividends or share buybacks.

Apple has seen increased pressure of late to make some sort of move with its massive holdings, the most publicized being David Einhorn's lawsuit against the company in hopes of garnering perpetual preferred stock. Despite Apple CEO Tim Cook's quip that the suit was a "silly sideshow," sources said the tech giant found the so-called "iPref" idea "interesting." The company has also reportedly hired Goldman Sachs to aid in assessing its options.

The publication claims Apple could announce the initiative alongside a product unveiling this Spring. Previous reports have predicted that the company will indeed announce plans for its growing cash pile soon, as investors have become skittish on the stock's recent market performance.

Since reaching a high of over $700 in September, shares of AAPL have fallen nearly 40 percent and closed trading on Tuesday at $428.43, down $9.44 or 2.16 percent.

Comments

  • Reply 1 of 17
    isaidsoisaidso Posts: 750member


    ZZzzzzzzZZzzzz.

  • Reply 2 of 17
    jfc1138jfc1138 Posts: 3,090member
    Stock buybacks were said at the financial call to be the reason they didn't state a future eps. Since the buyback would be changing the number of shares.

    So the prospect of a stock buyback is probable.
  • Reply 3 of 17
    ko024ko024 Posts: 68member
    A REPORT said that..!!!?? wow..!!
  • Reply 4 of 17
    msuberlymsuberly Posts: 226member
    So the preferred method of returning cash to shareholders is a stock buy back or increased dividend. What other way is there for a corporation to give money to shareholders????
  • Reply 5 of 17
    quinneyquinney Posts: 2,525member
    ko024 wrote: »
    A REPORT said that..!!!?? wow..!!

    Not only that. The report was based on information from SOURCES CLOSE TO THE ISSUE. :p
  • Reply 6 of 17
    quinneyquinney Posts: 2,525member
    msuberly wrote: »
    So the preferred method of returning cash to shareholders is a stock buy back or increased dividend. What other way is there for a corporation to give money to shareholders????

    Magic preferred shares.
  • Reply 7 of 17

    Quote:

    Originally Posted by jfc1138 View Post



    Stock buybacks were said at the financial call to be the reason they didn't state a future eps. Since the buyback would be changing the number of shares.


    Really? By whom? When during the call? Care to provide a cite from a transcript?

  • Reply 8 of 17
    tjrsvtjrsv Posts: 35member
    I thought SJ prepped Cook for CEO, saying hands down he's the one...Jordan supposedly did that for Pippen and the late great Bulls as well.

    Pippen was pretty boring to watch without MJ...Same and Cook AND Jony without SJ...they are getting their asses kick by the boys of Wall St. (Who do matter bu the way:-)
  • Reply 9 of 17
    SpamSandwichSpamSandwich Posts: 31,100member


    "Apple may offer stock buyback or increased dividends this Spring"


     


    ... or maybe NOT.

  • Reply 10 of 17
    chabigchabig Posts: 624member

    Quote:

    Originally Posted by msuberly View Post



    So the preferred method of returning cash to shareholders is a stock buy back or increased dividend. What other way is there for a corporation to give money to shareholders????


    Those are the only ways.

  • Reply 11 of 17
    hmmhmm Posts: 3,405member

    Quote:

    Originally Posted by jfc1138 View Post



    Stock buybacks were said at the financial call to be the reason they didn't state a future eps. Since the buyback would be changing the number of shares.



    So the prospect of a stock buyback is probable.




    Aren't they able to hold them to fulfill future employee stock options or am I missing something?

  • Reply 12 of 17
    jragostajragosta Posts: 10,473member
    chabig wrote: »
    Those are the only ways.

    Those are the only ways to give money to shareholders.

    However, there is also the concept of adding value - which doesn't have to involve a direct transfer of money. Apple has done an incredible job of increasing the value of its shares for the last decade and a half - which clearly benefits shareholders. In fact. the benefit from increased share price dwarfs the amount paid out in dividends.

    If you're only interested in cash returns, buy Savings Bonds. If you're interested in value creation, dividends aren't really the best way to do it.
  • Reply 13 of 17
    msuberlymsuberly Posts: 226member
    jragosta wrote: »


    If you're only interested in cash returns, buy Savings Bonds. If you're interested in value creation, dividends aren't really the best way to do it.

    Reinvest the dividends. If the stock falls or trades flat over time, your share count (and future dividends) will compound. If the stock rises, you compound less.
  • Reply 14 of 17
    msuberlymsuberly Posts: 226member
    hmm wrote: »

    Aren't they able to hold them to fulfill future employee stock options or am I missing something?

    Apple sold the shares decades ago. In order to pay them to employees as compensation, Apple has to buy them from somewhere or create more through a secondary offering.

    Creating new shares simply dilutes the value of all shares. Buying them back just to give to an employee does not hurt current shareholders, but does not help them any. Only buying them back and canceling those shares has an effect, albeit indirect, on the value of current shares.
  • Reply 15 of 17
    msuberlymsuberly Posts: 226member
    quinney wrote: »
    Magic preferred shares.
    Which pay a static dividend over time, much like a bond.
  • Reply 16 of 17
    mikeb85mikeb85 Posts: 506member

    Quote:

    Originally Posted by jragosta View Post





    Those are the only ways to give money to shareholders.



    However, there is also the concept of adding value - which doesn't have to involve a direct transfer of money. Apple has done an incredible job of increasing the value of its shares for the last decade and a half - which clearly benefits shareholders. In fact. the benefit from increased share price dwarfs the amount paid out in dividends.



    If you're only interested in cash returns, buy Savings Bonds. If you're interested in value creation, dividends aren't really the best way to do it.


     


    The problem with 'adding value' is that once stocks get to a certain market cap, they max out if you will.  At which point investors only care about cash (ie. buybacks and dividends). 


     


    Why buy into a 400 billion dollar company expecting it to go to what, 500 billion?  When you can invest in a 5 billion dollar company which will have a much easier time achieving a 20 billion dollar market cap. 


     


    This is the real issue with Apple's stock.  They've reached a point where exponential growth is difficult, but also where their already high market cap makes it more difficult for investors to achieve gains on the stock price.  400 billion to 500 billion is a 25% gain, whereas you buy into a company with a smaller market cap and an increase in value of 5 billion can mean doubling up. 

  • Reply 17 of 17
    jragostajragosta Posts: 10,473member
    mikeb85 wrote: »
    The problem with 'adding value' is that once stocks get to a certain market cap, they max out if you will.  At which point investors only care about cash (ie. buybacks and dividends). 

    Why buy into a 400 billion dollar company expecting it to go to what, 500 billion?  When you can invest in a 5 billion dollar company which will have a much easier time achieving a 20 billion dollar market cap. 

    This is the real issue with Apple's stock.  They've reached a point where exponential growth is difficult, but also where their already high market cap makes it more difficult for investors to achieve gains on the stock price.  400 billion to 500 billion is a 25% gain, whereas you buy into a company with a smaller market cap and an increase in value of 5 billion can mean doubling up. 

    This is all nonsense. There's no intrinsic reason why the market cap must max out nor is there any reason that the value can't continue to increase.

    In fact, Apple continues to increase their value. Profits are still growing. Sales are still growing. While Wall Street's estimate of the value (market cap) has declined, the value of the company is clearly still going up.

    It's true that percentage gains will be smaller for a large company, but so are the risks.
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