Apple cash hoard could hit $170 billion this year

Posted:
in AAPL Investors edited January 2014
Moody?s Investors Services noted in a report today that Apple's cash pile could reach $170 billion this year if the company doesn't change its policies regarding dividends and stock buybacks.

Top cash holding, not bank US corps


A report by Marketwatch cited the research note, which alarmingly warned, "unless Apple changes its philosophy towards liquidity/shareholder returns by increasing its $10 billion annual common dividend, or if Apple increases it stock buyback program, we estimate Apple?s cash balances could increase by another $35 billion in 2013 and exceed $170 billion."

Moody's profiled cash stockpiles among non-financial US corporations as amounting to $1.45 trillion at the end of 2012, more than a third of which ($556 billion) is held by tech companies.

Nearly a quarter of the total ($347 billion) is being held by five companies, with Apple at the top of the list with over $137 billion. Microsoft, Google, Pfizer and Cisco round out the top five.

Apple announced plans last year to distribute $2.5 billion each quarter to shareholders as a dividend, and said it would earmark another $10 billion in stock buybacks to offset stock-based compensation. In total, this would amount to around $45 billion over the next three years.

The company has also outlined plans to invest $10 billion in 2013, including nearly $1 billion to enhance and expand its retail stores worldwide, and $9 billion in facilities and infrastructure, including data centers, new office buildings, and manufacturing equipment it will install at its partners' facilities to help guarantee a smooth supply of components.

Despite having articulated plans to put $55 billion of its cash pile to work, Apple continues to generate so much new cash flow that its assets continue to expand. Last quarter, the company added another $16 billion.

While commonly depicted as a cash "hoard," Apple's "cash" is actually conservatively invested in corporate securities (over $46 billion), US Treasury and US agency securities (over $39 billion), and other money market funds, mutual funds, municipal securities and mortgage and asset backed securities, according to the company's most recent 10-K filing.
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Comments

  • Reply 1 of 34
    jragostajragosta Posts: 10,473member
    So Apple will shortly have 1/10 of the entire cash reserves of all of corporate America (not counting finance firms).

    Pretty amazing - especially to those who lived through the bleak years in the late 90s.
  • Reply 2 of 34
    jungmarkjungmark Posts: 6,647member
    The horrors! Warning: Apple earns more money than they can spend!
  • Reply 3 of 34
    dunksdunks Posts: 1,233member
    They should pay North Korea to start nuking Samsung's HQ. :D
  • Reply 4 of 34
    Isn't it funny how the tone of all Apple news and blogs have changed in last few days! What was "cash" hoarding few days is now "conservatively invested"! Apple faithful! Hang in there! I think you know your company better than all these Wall Street analysts!
  • Reply 5 of 34
    slurpyslurpy Posts: 5,107member
    So basically, Apple is just barely hanging on by a thread... Or something.
  • Reply 6 of 34
    christophbchristophb Posts: 1,448member
    Some of that was mine. Only 4-figures per year though.

    iPhone, iPad, iMac or MBP purchase makes it hard to break into the 5-figure realm.
  • Reply 7 of 34
    christophbchristophb Posts: 1,448member
    dunks wrote: »
    They should pay North Korea to start nuking Samsung's HQ. :D

    Quickest way to see selective service to be utilized once again.
  • Reply 8 of 34
    normmnormm Posts: 545member
    Wall Street will not reward Apple if they give more money back to investors. The stock typically changes more in value each day than any plausible quarterly dividend. So how would investors even notice this? This would just be a waste of money.
  • Reply 9 of 34
    christophbchristophb Posts: 1,448member
    jragosta wrote: »
    So Apple will shortly have 1/10 of the entire cash reserves of all of corporate America (not counting finance firms).

    Pretty amazing - especially to those who lived through the bleak years in the late 90s.

    Imagine how they would have done in a robust US economy....

    Edit: I'm hoping they take it back private. F TheStreet
  • Reply 10 of 34
    Wow! 65 billion more and they can buy Microsoft!

    Or at least do a hostile takeover!

    Dividend! Smividend!
  • Reply 11 of 34
    jragostajragosta Posts: 10,473member
    christophb wrote: »
    Imagine how they would have done in a robust US economy....

    Edit: I'm hoping they take it back private. F TheStreet

    Not the least bit likely. However, I would like to see them make some massive stock buybacks - $50 to $100 B should do it.
  • Reply 12 of 34
    dasanman69dasanman69 Posts: 12,973member
    jungmark wrote: »
    The horrors! Warning: Apple earns more money than they can spend!

    One can actually earn too much money.
  • Reply 13 of 34
    jragostajragosta Posts: 10,473member
    dasanman69 wrote: »
    One can actually earn too much money.

    Please explain.
  • Reply 14 of 34


    Maybe they can buy an island or a country and move everything there an than they don't have to worry about taxes, etc. ;-)

  • Reply 15 of 34

    Quote:

    Originally Posted by jragosta View Post





    Please explain.


    Please don't. I don't think I'm up to having my brain addled by his attempts at twisting things to fit his version reality right now.

  • Reply 16 of 34
    jungmarkjungmark Posts: 6,647member
    jragosta wrote: »
    Please explain.

    He wants a handout without doing any work.
  • Reply 17 of 34
    msuberlymsuberly Posts: 226member
    christophb wrote: »

    Edit: I'm hoping they take it back private. F TheStreet

    I don't understand why people on here (or anywhere) want Apple to go private? What is the point of doing that, other than borrowing massive amounts of cash and paying a shitload of taxes to repatriate overseas assets to buy out existing shareholders? Does anyone with half a brain actually expect new, different, or better products?
  • Reply 18 of 34
    msuberlymsuberly Posts: 226member
    dasanman69 wrote: »
    One can actually earn too much money.

    No, a corporation can't earn too much money. But it can have too much money.

    "invested in corporate securities (over $46 billion), US Treasury and US agency securities (over $39 billion), and other money market funds, mutual funds, municipal securities and mortgage and asset backed securities" makes Apple sound like more like a mutual fund that also happens to make products. At some point, and I do not profess to know where that point is, a company has so much money that it spends too much time, attention, and expense managing its money than perfecting its products.

    The other problem with having too much cash "conservatively invested" is that inflation will decrease the purchasing power of that money.
  • Reply 19 of 34
    correctionscorrections Posts: 1,246member

    Quote:

    Originally Posted by NormM View Post



    Wall Street will not reward Apple if they give more money back to investors. The stock typically changes more in value each day than any plausible quarterly dividend. So how would investors even notice this? This would just be a waste of money.


     


    It's certainly interesting to see the results of Apple's first $45 billion dividend and stock buyback program: the stock went from $619 to $700 and then plummeted to $420 within six months.


     


    In the year prior to announcing the dividend (in March 2012), Apple's stock went from around $330 up to $630.


     


    After announcing it, it dropped $100 in a month, then recovered slightly before dropping $200 as Apple issued 3 dividend payments.



    It looks like Steve Jobs was right: you pay a dividend and the cash goes away and the stock doesn't have any reason to move. It now has a reason to drop (the company has slightly less cash!) 


     


    So people demanding more dividends: would you rather have $2.65/share every quarter or stock worth +$200 more per share? Kind of a dumb trade. 

  • Reply 20 of 34
    christophbchristophb Posts: 1,448member
    msuberly wrote: »
    I don't understand why people on here (or anywhere) want Apple to go private? What is the point of doing that, other than borrowing massive amounts of cash and paying a shitload of taxes to repatriate overseas assets to buy out existing shareholders? Does anyone with half a brain actually expect new, different, or better products?


    I'm interested in Apple making better products and not wasting time and capital having to answer to, cater to, defend against litigation etc from publications and hedge funds intent on manipulating stock with predictions and rumor for short-term gains on the backs of investors who believe in the product. I don't think Apple going private or owning a controlling interest, as jragosta suggests as more likely, are mutually exclusive. Spending the liquidity on what is in the best interest of Apple is in the Apple consumer's best interest.

    Fortunately, I have more than half of a brain so the ad-hom failed. Borrowing against cash on hand and breaking even on earned vs expensed is a good strategy until the gov catches up. When has legislation ever caught up innovation?
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