“Share repurchases and dividends are often viewed as a good sign for a company since they are ways of returning cash to the investors,” Jim Pyke writes for Seeking Alpha.
“However, returning too much cash can possibly put a company in a more challenging situation should there be a downturn in business or should debt markets freeze,” Pyke writes. “During initial growth phases, companies often return very little capital and quite commonly continue to raise it through equity and debt issuance. Some technology companies are only starting to pay dividends, with Cisco Systems, Inc. a notable example.”
Advertisement: Limited Time: Students, Parents and Faculty save up to $200 on a new Mac.
Pyke reports, “While AAPL is not necessarily unique in the fact that it has a very large rainy day fund set aside; it is unique in the fact that AAPL has shown no interest in giving cash back to shareholders through either stock buy backs or dividends. In fact, AAPL is actively issuing more equity and taking in more cash… I think the market would view an AAPL dividend or stock buy back as a positive event.”
Read more in the full article here.
MacDailyNews Take: Certainly Apple is unique. And, just as certainly, Steve Jobs has a plan for the cash on-hand. Armchair peons should sit back, shut up, and watch it unfold. Stop calling for unique Apple to act like every other company.
And Cisco is laying off 6,500. Yep, smart move Cisco!
Reference: http://www.huffingtonpost.com/2011/07/18/cisco-layoffs-thousands-employees_n_902180.html
This is the height of lunacy.
Yeah!
technology is always changing. it is possible that a tech innovation, such as a faster new processor or memory technology, could change the face of computing. Apple needs the cash horde especially if a game changing quantum computing solution that obsoletes intel or arm is commercialized.
Your comment is the best of the lot. Apple pursues people, not dollars, which is why it’s making so many of them.
cash hoarding is bad as it takes money away from shareholders
unless they find a use for it which means most or all of it then we will continue to complain about their excessive hoarding
First, cash hoarding does not “take” any money away from AAPL shareholders. AAPL is generating those profits and storing them. Second, about 70% of AAPL is owned by institutional investors who are far more concerned about total return than dividends. Third, if a shareholder wants some cash flow, then he/she/it can sell some shares. The capital gains taxes are historically low at 15%.
It is also worth noting that a substantial portion of the stored Apple assets are invested in long term instruments.
@kingmel: Your lack of knowledge of basic economics is astounding. Those institutional investors constantly have to make payouts for retirees do like to get their retirement checks in the mail.
So Big Institution’s Fund Manager has a choice of two stocks, company A and company B. Both cost the same, both have roughly the same growth, and their revenue & earnings are similar.
But company A pays a dividend whereas company B does not. Do you honestly think that Big Institution’s Fund Manager is going to ignore the fact that company B doesn’t pay a dividend, when if he put his money in company A he would be getting regular cash payouts with which he could either pay his retirees or reinvest to buy more shares of company A?
The problem is that owning Apple’s shares only benefit you when you sell them. Thus in order to see a return people have to sell them. That suits me because I don’t expect to be in the selling mode for another couple decades. But it increases volatility in the share price because you have a constant parade of people selling in order to see a return.
And even though I don’t expect to sell for a few decades a dividend sure would be nice because then I could see my investment compound even more.
All I know is that $75 of that $70 billion cash pile is rightfully mine. Now if Apple uses my $75 wisely I won’t complain, but eventually that cash pile will become so large that it can’t serve a useful purpose (see law of large numbers).
How about I give you $75 and you s.t.f.u.
It would be worth it.
Best comment of the day.
hahaha if there is a company that gives money (and lot’s of it) to share holders it’s apple.
Cash hording does NOT take money away from shareholders. You bought your shares knowing that Apple does not pay dividends. You don’t like that fact, sell your shares.
Apple’s cash allows it to make very unique deals for components which saves the company money and increases profits. Apple can make unique partnerships, like the group which purchased Nortel’s patents, due to its plentiful cash. Apple can also buy up companies it sees as advantageous to integrate into its technology, and can get better terms by paying cash instead of having to finance acquisitions.
Plus, Apple is not dependent on financing from the market, which these days is difficult to do and gets more and more expensive to arrange every year due to more government regulations, the size of the amounts being financed, risk management, etc.
Apple’s cash gives is a huge advantage over its competitors. Just look at the iPad (er, I mean tablet) market, or the utter dearth of MacBook Air competitors, as proof.
Somehow I doubt you have any Apple stock. But I strongly suggest that you sell it, because obviously Apple sees things differently than you. Apple is under no obligation to distribute cash to shareholders, and the government makes this a bad idea anyway via taxation.
Are you crazy ? Every company that issues stock has a duty to maximize shareholder return. Apple has a duty to either invest that cash to maximize returns or give it back to the shareholders.
Cap Ex expansion has been the siren song for many a company that hemmoraged cash and got delusions of granduer and started “empire building”. The new spaceship that Apple wants to build is just another symptom of having too much cash lying about.
If Apple wants more money for some “sudden” aquisition, they can easily finance that through the capital markets given Apples growth and Free cash flows.
Sitting on cash and loosing value to opportunity costs, inflation and agency costs is repugnant and a disservice.
People need to look at Apple dispassionately, the current “corporate cult” that it has generated is a dangerous phenomenon.
I did my part to support unique Apple yesterday by buying the unique 13″ MBA – the third generation of tomorrow’s laptop computer. No one is making incredible portable electronic devices like Apple!
It is easy to use words to spin reality. Legal tax deductions are called “loopholes”. Saving is called “hoarding.”
And talking out of your butt is called “analysis”. (Wait, that one may be fine. Is the root word of analysis ‘anal’?)
Saving is what people flipping burgers and driving cabs do to save up to buy a big TV they don’t need or an Iphone they can’t afford. Investing is what people who make decent wages do.
Think about it this way..
Apple could, in essence, cover all their operating costs, pay every employee their wages, and not take in a DIME for nearly 2 years and still be sitting ok with zero debt.. That would essentially take their cash horde down to $0..
I say… Hang on to it. Apple will still invest.
Last Time I checked I think it was nine years, not two. Must be even more now.
Apple plans to build a starship with all its cash. The new “mothership” campus is aptly named. Jobs will not apply for a flight permit because the bureaucrats or some preservation society would block him. When the time is right, the ship will simply take off—then we’ll see a “halo effect” unlike anything before.
Rappture.
Here I go again…
At some point Apple will do something with its cash. I’ve been saying this all along. Most investors want Apple to do something with its cash.
The cash “problem” as it stands now is that while Apple is firing on all cylinders (and then some), and every aspect of Apple’s business is just spectacular, if you take a look at each dollar invested in Apple and divide it up towards what makes up the value of the business, over 20% of it is in Apple’s cash.
The problem is that while Apple is busy receiving cash for iOS devices, Macs, iTunes purchases, and from every other business unit, its “cash” unit is sucking big time.
Carve off any of Apple’s businesses and evaluate them and you’ll see a nice operating margin of about 30%.
Each one of Apple’s business units is doing great against the competition and *growing* like crazy.
However, the cash, as a business unit sucks big time. The return on it is really lousy. So bad, that it’s considered an opportunity loss since any rational use of the cash would result in a better gain than the crappy return they’re getting to date.
Statistically, they could take the cash and randomly buy any other of the top NASDAQ companies, and yield a better return than what they’re currently getting. They could put the money in gold or other commodity markets and get a higher return.
So that’s what investors are complaining about. It’s as if every dollar being invested in Apple comes with a 22% tax. And there’s little guidance on what that tax will be used for.
Watch though…
At some point, Apple will have to do something with the cash. Either buy something big, or return it to investors.
And no, not all of the cash. Apple of course needs billions of dollars in cash for operations, leverage, and acquisitions, but the enormous cash horde can’t just keep growing.
Although I believe is using it’s cash wisely in strategic moves like buying up components, financing new manufacturing etc , I think Apple has so much cash and so much cash coming in every quarter that it can afford a small dividend without jeopardizing it’s strategic planning.
To move aapl which has a huge market cap up you need more investors and many people simply won’t buy shares unless they pay dividends (lots of retired people seem to shift plenty of their retirement cash into dividend funds and people like Jubak, Cramer – like him or hate him – has been banging the ‘buy dividend yield stock’ for the economic down turn etc).
Similarly paying dividends would allow aapl to be listed on hundreds of dividend mutual funds. Dividend yield mutual funds are sold by banks, are part of company retirement funds etc. This increases aapl’s market hugely.
Many people don’t understand apple’s cash position, and it’s not factored into the PE ratios shown by MSNmoney etc . Over and over again I’ve seen even experienced investors say Apple’s P.e is ‘high’ (as they have not factored in the cash) vs some of its competitors. So building up a super gigantic cash pile above and beyond strategic needs doesn’t compel lots of investors (who looking at the P.E) to buy in.
want aapl to go up? we need more people buying them.
If aapl would pay dividends (even a small one) aapl would shoot up even more.
PAying a dividend would be a disaster. If they did it once, they would be expected to do it all the time. People/investors who do not understand Apple are certainly well advised to buy something else. Apple IS NOT a fast buck day trade stock, regardless of the hedge fund robber bandits.
If any Apple stock holder wants to profit from Apple, just sell some shares.
why would it be a disaster?
If apple with a GIGANTIC cash flow, Largest cash pile in existence and no debts can’t pay dividends then what other companies can?
apple can afford a small regular dividend without jeopardizing their use of their cash for strategic reasons
Apple has a huge market cap , to make aapl move upwards it needs a lot of investors pouring money in. Paying dividends will broaden the potential market (see my post) of buyers by a huge amount.
“If any Apple stock holder wants to profit from Apple, just sell some shares.”
lots of people selling shares will push the price down right? Example: Don’t you want retirement funds to fund their payouts with dividends instead of selling aapl shares, or retired rich people who own thousands of aapl not to sell them but just live off their dividends (that’s why so many retirees buy dividend shares like Exxon) ?
As a aapl stockholder i want many new people to buy aapl BOTH long term growth buyers AND people who want dividends.
This is crazy. Do not understand Apple ?? Give me a break- apple is a company that is out there to make money. That’s all anybody who buys apple stock needs to know or wants to know. Apple has a duty to maximize shareholder return, they either ought to invest in some way that will improve their revenues or give that cash back to the investors either through a stock repurchase or a dividend.
Nobody expects a company to pay dividends like a bank pays interests but people do expect a company to share its profits with its shareholders – either through increased share price or through dividents or a greater ownership per share. Apple isn’t doing any of the above keep that money just burning a hole in their pocket.
Apple has nearly $30 billion in cash just lying around. $30 billion is much more than enough to fund ANY new acquisition. Building fancy offices is not what shareholders believe is a good investment in the future.
@MrEdOfCourse
exactly…I don’t think anyone could have a better point very close to what i was thinking…their hardly doing anything with that cash and shareholders here just assume they WILL use and it as far as strategic advantage they are far in excess of the needs for that since they will soon have 150-200 billion in cash
somewhere in the next 10 years there will be a massive dividend since there is simply no acquisition target for the amount of money they will have soon
Apple is paying back shareholders with significant increase in share value. They don’t need to do more than that. Shareholders can cash-in at any time if they need the money.
Dediu (asymco.com) calculated that Apple would spend half the cash in taxes in order to pay a dividend. I’m not aware of any serious analysis that indicates that dividends would be remotely a good use of their cash.
http://www.quora.com/Horace-Dediu/Apple-Inc-2/answers
asymco is calculating that if ALL it’s foreign cash holding is sent back to the states to pay dividends.
as Apple now has over 30 billion in the U.S which is not subject to repatriation taxes, it can use that instead. A small dividend is not going to eat up 30 billion and future cash flows will cover it. Very few companies total cash is even equal to Apple’s U.s cash holdings. As Apple’s heavy expenditures like manufacturing is overseas it can use it’s foregin cash holdings to deal with that.
@Davida
I agree with you but alot of people seem to think a dividend is impossible or bad so we just have to change all their minds one by one