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.
I think Cook sees exactly what he article mentioned... Apple is collecting money faster than they pay out even at this rate. Frankly, with the stock price sky high Steve more than paid back the investors that gave him back his company.
Cook can chase share value, but let's face it, it should peak out. At that point you don't want to fight keeping the shares up... That leads to terrible focus on quarter-to-quarter management. As a supply chain guy, Cook understands, like Google, to keep the stock price really high to thin out speculators, but to do that reasonably, you have to pay some dividends. The benefit is that investors collecting dividends are not in the game by quarter as long as the checks keep coming. Stock price just protects their nest egg from inflation. It doesn't take lots of stocks to have a nice "spending money" from a stock like AT&T. That's how a lot of little grandmas always seem to have money a holidays.
Investors that are going to leave you alone to "do your thing" are exactly what Cook wants to work with... He knows he's not a rockstar like Steve. Being stable like AT&T is MUCH harder fora tech company to do... In a lot of ways Cook is aiming for a lot higher bar.
When I was a kid, my dad had some investment help... Somehow he got an investment in Southern California Edison. They paid a dividend, but there was some special tax exemption that they could enroll in to have the dividend used to buy additional shares. A relatively small investment in an income stock grew exponentially into a relative large investment in what turned out to be a growth stock.
You can still get those. Search online for "dividend reinvestment plans". Some companies offer them to all shareholders (although not that many).
The dividends are still taxable, though, so you need to have the cash to pay the taxes on the dividends whether they're issued in stock or in cash.
As I remember it Buffet was talking about income tax rates, not dividends. The wisdom of congress in having lower taxes on dividends is that the govt is really taxing this money twice. First it (in this case) taxes Apple's revenues. What's left over Is profits. Apple then pays you a dividend payout from the profits and the govt then taxes you. You can look at it as a lower tax rate for the receiver of dividends or you can follow the money and see the govt as taxing that money twice.
As I remember it Buffet was talking about income tax rates, not dividends. The wisdom of congress in having lower taxes on dividends is that the govt is really taxing this money twice. First it (in this case) taxes Apple's revenues. What's left over Is profits. Apple then pays you a dividend payout from the profits and the govt then taxes you. You can look at it as a lower tax rate for the receiver of dividends or you can follow the money and see the govt as taxing that money twice.
The government does not tax Apple's revenues.
There is a sales tax in some (but not all) states where the government taxes the consumer, but that does not impact Apple directly, nor is Apple the one paying the tax (even when Apple is the retailer, the law simply says that Apple is collecting the tax from the consumer and forwarding it to the government.
The government DOES tax Apple's profits, so the 'double taxation' argument has some validity.
However, IMHO, it's a weak argument. Virtually everything you buy is taxed multiple times. Let's say you buy a car.
- Import duties may be applied if it's foreign-made
- The car company pays taxes on the profits
- The steel companies pay taxes on the profits
- The car dealer pays taxes on the profits
- The tire companies pay taxes on the profits
- You pay a variety of sales and use taxes in most states
- The car companies pay their share of employment taxes. Same for the steel companies, tire companies, etc.
- The trucking company who delivers their car pays taxes on their profits.
And so on.
Anything you buy has taxes applied at many places in the production, delivery, and sale process. It's not clear why dividends are unique in that regard.
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.
Moreover, you don't pay long-term capital gains rates if you are hit with the AMT, thus negating most of the benefit. I don't think anybody with mid-six figures income can avoid paying 28% tax on all gains.
Why does this article contain political overtones? Most investors are aware of the ramifications of dividend income vs capital gains... and are extremely aware of the games the politicians are playing with the tax code/tax cuts.
Further, most readers of DED are aware of his extreme political views...
Neither of these contribute any value to this article.
unfortunately, the USA has at least a 15 Trillion (milion million) debt... and a deficit of 1.5 trillon a year (last time i checked) so roughly every working american (150 million) will have to pay an extra 16 thousand dollars in taxes... (10 thousand to cover the deficit, and 6 thousand for 18 years, assuming that usgov spending can be reduced by 4% a year)...
easy!... except that the average american salary is roughly 50 thousand dollars so an addition ~33% taxes will have to be added for the next 18 years (at least)...
of course IMO.
You don't need the stock to split. You can buy 1 share now. One share at $630 is exactly the same percentage of AAPL's capitalization as 10 shares at $63 would be.
I'm finished banging my head against a wall. Over. Out.
With all due respect, as you are obviously very knowledgeable on this subject, but IMHO you may be greatly under estimating the number of people who would buy AAPL if it were 1/10th the price. I'd suspect far more than required to make up for the lower price.
The government does not tax Apple's revenues.
There is a sales tax in some (but not all) states where the government taxes the consumer, but that does not impact Apple directly, nor is Apple the one paying the tax (even when Apple is the retailer, the law simply says that Apple is collecting the tax from the consumer and forwarding it to the government.
The government DOES tax Apple's profits, so the 'double taxation' argument has some validity.
However, IMHO, it's a weak argument. Virtually everything you buy is taxed multiple times. Let's say you buy a car.
- Import duties may be applied if it's foreign-made
- The car company pays taxes on the profits
- The steel companies pay taxes on the profits
- The car dealer pays taxes on the profits
- The tire companies pay taxes on the profits
- You pay a variety of sales and use taxes in most states
- The car companies pay their share of employment taxes. Same for the steel companies, tire companies, etc.
- The trucking company who delivers their car pays taxes on their profits.
And so on.
Anything you buy has taxes applied at many places in the production, delivery, and sale process. It's not clear why dividends are unique in that regard.
You make sense to me. Also wouldn't Apple's profits be lowered by paying a dividend thus actually reducing tax liability?
Moreover, you don't pay long-term capital gains rates if you are hit with the AMT, thus negating most of the benefit. I don't think anybody with mid-six figures income can avoid paying 28% tax on all gains.
Not true. You lose a lot of things under the AMT, but the 15% rate on qualified dividends & long-term capital gains isn't one of them.
Moreover, you don't pay long-term capital gains rates if you are hit with the AMT, thus negating most of the benefit. I don't think anybody with mid-six figures income can avoid paying 28% tax on all gains.
That's not right. The long term capital gain rate applies to all your long term capital gains. Regardless of the amount. What changes is the tax rate on your ordinary income. That's because the amount you make in long term investment income, after paying the long term capital tax, is added into the AMT calculations. Even if you have $1,000,000 of long term capital gains, you will only pay the long term capital gains rate on all of it. It's the tax rate on your other income that will increase as you start to lose deductions due to AMT. If you have no other income, you will only have to pay the long term capital rate on all long term capital gains. Even if it's in the millions of dollar. AMT only applies to ordinary income.
When I was a kid, my dad had some investment help... Somehow he got an investment in Southern California Edison. They paid a dividend, but there was some special tax exemption that they could enroll in to have the dividend used to buy additional shares. A relatively small investment in an income stock grew exponentially into a relative large investment in what turned out to be a growth stock.
You can still get those. Search online for "dividend reinvestment plans". Some companies offer them to all shareholders (although not that many).
The dividends are still taxable, though, so you need to have the cash to pay the taxes on the dividends whether they're issued in stock or in cash.
Ahh... I was under the impression that the dividend reinvestment arrangement avoided taxes (as well as transaction fees)... It was the early 1990s, so that may have been the case at the time. AIR, the dividends were in the range of 10% or more, so the initial investment was compounding rapidly. My dad had an investment firm that handled most of his investments -- but this investment he had made on his own. When my dad died a few years later, the investment firm advised my mother to consolidate this, and several other "outside" investments, into their account. I felt she should let these alone -- but didn't have the background or expertise of the investment firm (who had done quite with dad's investments).
Long story, short -- the outside investments were soon liquidated, and replaced with stocks with a much lower yield.... The firm. merged with another, then was taken over by a large national firm. I was [to be] executor of the estate. so I monitored mom's investments.
My moment of truth came in 2001, when HP and Compaq merged. The estate had large investments in both stocks (both had lost money), andboth stocks lost even more as a result of the merger.
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.
Absolutely not true. Your initial investment was taxed, assuming it was earned income, at the tax rate relevant to the bracket you were in at the time.
When you sell your shares, you deduct what you paid for them, plus brokerage fees and commissions, and pay tax on the profit, which is why it's called capital GAINS.
… You don't seem to get it. What if someone can only do 500? They can't even buy one share. I picked easy numbers because I figured people would get see what I was saying with them.
From reading through this thread, there are obviously people who probably shouldn't be in the stock market to begin with (at least not buying individual stocks), because they don't seem to possess the basic, fundamental knowledge to be investing in this fashion. And if a single stock purchase is going to take 100% of their investable capital, that's just another reason why they shouldn't be buying individual stocks. Before buying the first share of stock (whether 1, 10 or 100 shares), the investor should FULLY understand how dividends work and when they are paid (there is no pro-ration or accrual period - these are not bonds). There is absolutely nothing wrong with those people buying into ETF's or mutual funds though - as long as they take the time to understand how those investment vehicles work as well. There are ETF's and mutual funds which have AAPL as a significant holding. Though, just as a smaller investor should do, once Apple appreciates to a point that it represents too large a portion of the fund, they have to sell some of it. Otherwise they'd be overweight in one company. And that's not very smart. If a smaller or novice investor is truly determined to be in the market, that's probably where those individuals should be investing. All too often on here (and other places), you can see that, for some, these stock purchases are based on emotion, or being a fan of a certain company or its products.That is a sure fire way to lose perspective and reason, which leads to losing money. If the time comes that I determine that AAPL is no longer a good investment for me, I would still like their products (and the company itself), but I would have no problem closing my long positions or even going short... at the very least buying some puts/selling some calls. The recent FaceBook debacle is clear evidence of that: emotional investing is just a foolish way to lose money.
IMO, Apple should absolutely NOT be focused on doing spits or manipulating the stock price in any way, just to get smaller investors to a point where they can buy something other than an odd lot. I'd like a new Ferrari. But if I can't afford a whole car, Ferrari shouldn't put me on a payment program where I'm buying one piece at a time. "Oh look, honey, I got a wheel in the mail today! Next week I'll be getting a fender!" *lol*
As for the dividend, this dividend does not take away from Apple being a "growth stock". I couldn't disagree more with that assertion early on in this thread. If the company was having to borrow money to fund the dividend (like Nordic American Tanker - NAT), or having to change its acquisition or R&D objectives because of the dividend, that would be another matter. But that is not the case... far from it. Apple's "problem" is that it has too much cash on the books. And because the company has been earning almost nothing on that cash, returning some small portion of it to shareholders every quarter (while more rolls through the door) makes perfect sense, IMO. For those who have actually studied the market, they know that dividends are simply a part of a total return strategy with many, if not most stocks. Even if a stock goes up 1000%, you haven't actually made anything from it until you sell it. As pointed out by another poster, with a dividend, you are at least making a real return on your investment from quarter to quarter.
There's an interesting study by Gary Kaminsky about the optimal use of free cashflow on the wall at CNBC right now. Check out the site and see what you think. If you have CNBC Pro on your iPhone/iPad/iPod, I think it's also there. In summary, it details the best and worst use of free cashflow. The worst use of free cash is to just sit on it (as Apple has been doing). Next up the line is mergers and acquisitions - as they quite often tend not to produce very good returns, and may create bigger organizational issues (Hewlett Packard and Compaq). Next is stock buybacks. While it may sound good for a company to invest in itself, the returns from doing so tend not to be so spectacular, mainly because of market timing issues. Big companies, like small investors, also have a tendency to buy at the top. So the returns are average. Next is using the free cash to pay dividends. The purpose of a publicly traded corporation is to do what? Create or enhance shareholder wealth and value! That's it. That's all. Not to cure cancer or save the rain forest. For good or bad, better or worse, it really is about $. So by returning cash to the people who (actually) own the company, that obviously enhances their wealth (as long as the company can fund its operations and growth as it does so). Over the longer term, dividends and reinvested distributions have represented approximately 55% of equity returns in the S&P 500. And at the top of the list is organic growth. So the best use of a company's cash is R&D, new product development, etc. Luckily, for those of us who own AAPL, the company seems to have plenty of cash to do all of these things. So it just comes down to the allocation of this enormous free cashflow.
And just now, at $660.73/share, AAPL became the most highly valued publicly traded corporation in history (intraday trade). It just knocked Microsoft off the record it set back in the late 90's: $618.9 billion. And now, with the dividend, it's nice to be able to share in AAPL's success without having to sell any shares. Every little bit helps. Daddy needs new shoes for the car.
Comments
True, but it's a tax write off. Ha!
I think Cook sees exactly what he article mentioned... Apple is collecting money faster than they pay out even at this rate. Frankly, with the stock price sky high Steve more than paid back the investors that gave him back his company.
Cook can chase share value, but let's face it, it should peak out. At that point you don't want to fight keeping the shares up... That leads to terrible focus on quarter-to-quarter management. As a supply chain guy, Cook understands, like Google, to keep the stock price really high to thin out speculators, but to do that reasonably, you have to pay some dividends. The benefit is that investors collecting dividends are not in the game by quarter as long as the checks keep coming. Stock price just protects their nest egg from inflation. It doesn't take lots of stocks to have a nice "spending money" from a stock like AT&T. That's how a lot of little grandmas always seem to have money a holidays.
Investors that are going to leave you alone to "do your thing" are exactly what Cook wants to work with... He knows he's not a rockstar like Steve. Being stable like AT&T is MUCH harder fora tech company to do... In a lot of ways Cook is aiming for a lot higher bar.
You can still get those. Search online for "dividend reinvestment plans". Some companies offer them to all shareholders (although not that many).
The dividends are still taxable, though, so you need to have the cash to pay the taxes on the dividends whether they're issued in stock or in cash.
The government does not tax Apple's revenues.
There is a sales tax in some (but not all) states where the government taxes the consumer, but that does not impact Apple directly, nor is Apple the one paying the tax (even when Apple is the retailer, the law simply says that Apple is collecting the tax from the consumer and forwarding it to the government.
The government DOES tax Apple's profits, so the 'double taxation' argument has some validity.
However, IMHO, it's a weak argument. Virtually everything you buy is taxed multiple times. Let's say you buy a car.
- Import duties may be applied if it's foreign-made
- The car company pays taxes on the profits
- The steel companies pay taxes on the profits
- The car dealer pays taxes on the profits
- The tire companies pay taxes on the profits
- You pay a variety of sales and use taxes in most states
- The car companies pay their share of employment taxes. Same for the steel companies, tire companies, etc.
- The trucking company who delivers their car pays taxes on their profits.
And so on.
Anything you buy has taxes applied at many places in the production, delivery, and sale process. It's not clear why dividends are unique in that regard.
unfortunately, the USA has at least a 15 Trillion (milion million) debt... and a deficit of 1.5 trillon a year (last time i checked) so roughly every working american (150 million) will have to pay an extra 16 thousand dollars in taxes... (10 thousand to cover the deficit, and 6 thousand for 18 years, assuming that usgov spending can be reduced by 4% a year)...
easy!... except that the average american salary is roughly 50 thousand dollars so an addition ~33% taxes will have to be added for the next 18 years (at least)...
of course IMO.
With all due respect, as you are obviously very knowledgeable on this subject, but IMHO you may be greatly under estimating the number of people who would buy AAPL if it were 1/10th the price. I'd suspect far more than required to make up for the lower price.
I answered the question that was posed. Whether or not high-yield dividend stocks are a good investment is not part of the discussion.
Any wise investor won't look at one statistic anyhow. There are dozens of statistics to look at, hundreds of pages of SEC filings to read.
In the end, it's a risk assessment decision that each investor makes. How much are you willing to lose? In terms of sleep and money.
You make sense to me. Also wouldn't Apple's profits be lowered by paying a dividend thus actually reducing tax liability?
Dividends are paid out of net income, after taxes.
Quote:
Originally Posted by aaarrrgggh
Moreover, you don't pay long-term capital gains rates if you are hit with the AMT, thus negating most of the benefit. I don't think anybody with mid-six figures income can avoid paying 28% tax on all gains.
Not true. You lose a lot of things under the AMT, but the 15% rate on qualified dividends & long-term capital gains isn't one of them.
Quote:
Originally Posted by aaarrrgggh
Moreover, you don't pay long-term capital gains rates if you are hit with the AMT, thus negating most of the benefit. I don't think anybody with mid-six figures income can avoid paying 28% tax on all gains.
That's not right. The long term capital gain rate applies to all your long term capital gains. Regardless of the amount. What changes is the tax rate on your ordinary income. That's because the amount you make in long term investment income, after paying the long term capital tax, is added into the AMT calculations. Even if you have $1,000,000 of long term capital gains, you will only pay the long term capital gains rate on all of it. It's the tax rate on your other income that will increase as you start to lose deductions due to AMT. If you have no other income, you will only have to pay the long term capital rate on all long term capital gains. Even if it's in the millions of dollar. AMT only applies to ordinary income.
Quote:
Originally Posted by jragosta
Quote:
Originally Posted by Dick Applebaum
I don't know if this is still possible...
When I was a kid, my dad had some investment help... Somehow he got an investment in Southern California Edison. They paid a dividend, but there was some special tax exemption that they could enroll in to have the dividend used to buy additional shares. A relatively small investment in an income stock grew exponentially into a relative large investment in what turned out to be a growth stock.
You can still get those. Search online for "dividend reinvestment plans". Some companies offer them to all shareholders (although not that many).
The dividends are still taxable, though, so you need to have the cash to pay the taxes on the dividends whether they're issued in stock or in cash.
Ahh... I was under the impression that the dividend reinvestment arrangement avoided taxes (as well as transaction fees)... It was the early 1990s, so that may have been the case at the time. AIR, the dividends were in the range of 10% or more, so the initial investment was compounding rapidly. My dad had an investment firm that handled most of his investments -- but this investment he had made on his own. When my dad died a few years later, the investment firm advised my mother to consolidate this, and several other "outside" investments, into their account. I felt she should let these alone -- but didn't have the background or expertise of the investment firm (who had done quite with dad's investments).
Long story, short -- the outside investments were soon liquidated, and replaced with stocks with a much lower yield.... The firm. merged with another, then was taken over by a large national firm. I was [to be] executor of the estate. so I monitored mom's investments.
My moment of truth came in 2001, when HP and Compaq merged. The estate had large investments in both stocks (both had lost money), and both stocks lost even more as a result of the merger.
Quote:
Originally Posted by ghostface147
True, but it's a tax write off. Ha!
Jerry: You don't even know what a write-off is.
Kramer: Do you?
Jerry: No, I don't.
Kramer: But they do... and they're the ones writing it off.
Quote:
Originally Posted by msimpson
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.Absolutely not true. Your initial investment was taxed, assuming it was earned income, at the tax rate relevant to the bracket you were in at the time.
When you sell your shares, you deduct what you paid for them, plus brokerage fees and commissions, and pay tax on the profit, which is why it's called capital GAINS.
Quote:
Originally Posted by Tallest Skil
… You don't seem to get it. What if someone can only do 500? They can't even buy one share. I picked easy numbers because I figured people would get see what I was saying with them.
From reading through this thread, there are obviously people who probably shouldn't be in the stock market to begin with (at least not buying individual stocks), because they don't seem to possess the basic, fundamental knowledge to be investing in this fashion. And if a single stock purchase is going to take 100% of their investable capital, that's just another reason why they shouldn't be buying individual stocks. Before buying the first share of stock (whether 1, 10 or 100 shares), the investor should FULLY understand how dividends work and when they are paid (there is no pro-ration or accrual period - these are not bonds). There is absolutely nothing wrong with those people buying into ETF's or mutual funds though - as long as they take the time to understand how those investment vehicles work as well. There are ETF's and mutual funds which have AAPL as a significant holding. Though, just as a smaller investor should do, once Apple appreciates to a point that it represents too large a portion of the fund, they have to sell some of it. Otherwise they'd be overweight in one company. And that's not very smart. If a smaller or novice investor is truly determined to be in the market, that's probably where those individuals should be investing. All too often on here (and other places), you can see that, for some, these stock purchases are based on emotion, or being a fan of a certain company or its products.That is a sure fire way to lose perspective and reason, which leads to losing money. If the time comes that I determine that AAPL is no longer a good investment for me, I would still like their products (and the company itself), but I would have no problem closing my long positions or even going short... at the very least buying some puts/selling some calls. The recent FaceBook debacle is clear evidence of that: emotional investing is just a foolish way to lose money.
IMO, Apple should absolutely NOT be focused on doing spits or manipulating the stock price in any way, just to get smaller investors to a point where they can buy something other than an odd lot. I'd like a new Ferrari. But if I can't afford a whole car, Ferrari shouldn't put me on a payment program where I'm buying one piece at a time. "Oh look, honey, I got a wheel in the mail today! Next week I'll be getting a fender!" *lol*
As for the dividend, this dividend does not take away from Apple being a "growth stock". I couldn't disagree more with that assertion early on in this thread. If the company was having to borrow money to fund the dividend (like Nordic American Tanker - NAT), or having to change its acquisition or R&D objectives because of the dividend, that would be another matter. But that is not the case... far from it. Apple's "problem" is that it has too much cash on the books. And because the company has been earning almost nothing on that cash, returning some small portion of it to shareholders every quarter (while more rolls through the door) makes perfect sense, IMO. For those who have actually studied the market, they know that dividends are simply a part of a total return strategy with many, if not most stocks. Even if a stock goes up 1000%, you haven't actually made anything from it until you sell it. As pointed out by another poster, with a dividend, you are at least making a real return on your investment from quarter to quarter.
There's an interesting study by Gary Kaminsky about the optimal use of free cashflow on the wall at CNBC right now. Check out the site and see what you think. If you have CNBC Pro on your iPhone/iPad/iPod, I think it's also there. In summary, it details the best and worst use of free cashflow. The worst use of free cash is to just sit on it (as Apple has been doing). Next up the line is mergers and acquisitions - as they quite often tend not to produce very good returns, and may create bigger organizational issues (Hewlett Packard and Compaq). Next is stock buybacks. While it may sound good for a company to invest in itself, the returns from doing so tend not to be so spectacular, mainly because of market timing issues. Big companies, like small investors, also have a tendency to buy at the top. So the returns are average. Next is using the free cash to pay dividends. The purpose of a publicly traded corporation is to do what? Create or enhance shareholder wealth and value! That's it. That's all. Not to cure cancer or save the rain forest. For good or bad, better or worse, it really is about $. So by returning cash to the people who (actually) own the company, that obviously enhances their wealth (as long as the company can fund its operations and growth as it does so). Over the longer term, dividends and reinvested distributions have represented approximately 55% of equity returns in the S&P 500. And at the top of the list is organic growth. So the best use of a company's cash is R&D, new product development, etc. Luckily, for those of us who own AAPL, the company seems to have plenty of cash to do all of these things. So it just comes down to the allocation of this enormous free cashflow.
And just now, at $660.73/share, AAPL became the most highly valued publicly traded corporation in history (intraday trade). It just knocked Microsoft off the record it set back in the late 90's: $618.9 billion. And now, with the dividend, it's nice to be able to share in AAPL's success without having to sell any shares. Every little bit helps. Daddy needs new shoes for the car.