“You can have too much of a good thing. That could be one thing holding back shares of Apple (AAPL),” Tiernan Ray writes for Barron’s.
“The stock has performed fantastically this year, rising 18% compared with a roughly 4% decline in the Nasdaq Composite Index,” Ray writes. “But many, including yours truly, believe Apple is due much more. At a recent price of $381.02, the stock trades at just 11 times this year’s projected $34.76 per share in profit. Factoring in Apple’s approximately $87 a share in cash, the multiple’s even cheaper. It’s an insanely cheap stock for a company that might increase profit per share by 26% this year.”
Ray writes, “Apple is the most broadly owned holding in U.S. large-cap growth funds among the top 10 stocks in the Russell 1000 Growth Index, according to a report last week by Sanford Bernstein research analyst Toni Sacconaghi. What that means is that growth funds have gorged themselves on Apple’s success to a degree that their own fund rules no longer permit them to buy the shares.”
Ray writes, Apple has both exhausted its shareholder base among its natural fans, the growth guys, and also failed to charm the other folks in the room, the value guys. And the value guys actually make up vastly more of the world’s assets under management… Apple is getting so big, it is challenged to find new investors. And as that cash pile grows and grows, the challenge becomes greater to lure the hold-outs, the value guys. ”
Much more in the full article here.
[Thanks to MacDailyNews Reader “Dan K.” for the heads up.]
Apple doesn’t need to pay dividends to grow its stock. Dividends won’t make you rich, the stock will. If you’re an idiot and think stock dividends will make you rich then go buy some other stock that has dividends and see how much money you’ll make off of them. Guarantee you unless you have millions of stocks, you’ll get nothing!
I own plenty of AAPL and happy to hold an watch it grow without a dividend for now.
Eventually, however, all companies that last need to pay out dividends and return their earnings to the shareholders.
I don’t really ever want to sell my shares as long as Apple remains the top tech company in the world. I would also like to receive a realized return on my investment while I wait. A small growing dividend in the near future would be welcomed by me.
Basically, I will soon want an income stream of an extremely successful company I have invested in without giving up my ownership stake.
Paying up dividends may actually lessen price of shares, since it currently accounts the huge pile of unpaid dividends that Apple has.
To it is tricky to pay dividends in Apple’s position. The sheer value of money the company has became major part of what Apple is on stock market.
If Apple would start pay dividends back in the time when it only have, like five billion of unpaid dividends, then it would not influence stock price anywhere as much as it would now.
So you are right that if Apple will start to pay dividends, it should be only small portion of the money. But then why to bother with such small values at all? What would be the point if, shareholders would get, say, $5 per share that costs almost $400?
So not paying dividends could be best strategy still.
That has quite possibly got to be one of the most ignorant short termist statements ever. Do you think of gold as an investment too?
Or are you one of those 1% investors who just drove our economy into a ditch?
Those of us in the 99% (at least the portion who can afford to buy any stock) buy stock to fund our retirements which may be 20, 30, 40 years out. Yes, Apple’s short term outlook is fabulous, but no one can tell me that when I retire whether some future CEO will have halved the stock price or tripled it. If it halves then my investment will lose money. OTOH if Apple pays a dividend at a comparable rate to, say AT&T, then my original investment will have quadrupled by the time I retire even if the stock price stays flat over that period.
Disagree.
A dividend from Apple could be very significant indeed.
Dividends can be reinvested in more shares.
Investors do own the company and they can be served with many forms of return when circumstances permit.
A dividend would raise interest in the shares and more share demand means the price will rise.
Apple will not suffer in the least by paying out half of all the net cash inflows each quarter.
Apple is growing %70 year. If they paid you a dividend, could you grow it %70 a year? Worse, if they paid a dividend, you’d be taxed on that dividend, so you’d have less to start with than Apple has by retaining it.
People who say Apple should pay a dividend are so financially ignorant that they shouldn’t be talking about stocks.
And nobody should be quoting them saying these asinine things.
Maybe Apple should split the stock 10-1, but its volatile enough already.
HAHAHAHAHA.
first the nonsensical understanding of dividends.. much less basic math.. which i’m not even going to touch.
But to follow that all up with a 10-1 stock split as a “maybe” over a dividend… HAHAHAHA
since you say ignorant asinine things, maybe you should take your own advice 😉
Apple does not need to pay a dividend.
The US needs to give them a Tax holiday to bring money home to the US where it can provide true value by being available – possibly even by paying a dividend – but not as long as they are taxed multiple times in multiple countries in order to liberate the cash.
Apple no longer has much need for shareholders and investors because the company can pretty much grow larger without them. As long as consumers buy their products, investors are of relatively little value to Apple. Honestly, what can shareholders do for Apple at this point except make unnecessary demands on Apple to part with their money? It’s Apple’s money now, not the shareholders. Shareholders have already got all they’re going to get. I doubt shareholders are going to be able to sue Apple for that reserve cash.
Give me one good reason at this point in time why Apple should be concerned about making shareholders rich. If Wall Street doesn’t give value to Apple, then why should Apple be concerned about giving money to shareholders. No one is being forced to invest in Apple, so any dissatisfied investors should sell their stock and invest in another company. That seems simple enough. Stop blaming Apple because Apple doesn’t control their own share price. Maybe Apple should just go private and be done with listening to idiotic demands about taking money from Apple’s personal piggy bank.
What’s the weather like on your planet?
Apple has not “needed” investors for a long, long time. When is the last time that Apple issued stock to raise money or used stock for an acquisition? That was the last time that Apple needed investors, because the stock price has no effect on day to day corporate operations. The *only* reason that Apple cares about the price of AAPL is that, as a corporation, Apple management is obligated to place an emphasis on providing value to investors (owners).
well.. and apple’s executives pin a lot of their earnings on the stock value.
True. I went a bit overboard with the *only*, although owning shares makes them investors – long term investors in most cases. So they care about the price of AAPL down the road and are not excited about blips.
Tax holiday? If Apple took that money stashed in overseas accounts and paid it back to investors as a one time dividend there would be no taxes to pay on the money.
Translation: The inestimable greed of we, the institutional holders and the sycophants that serve us, causes us to demand that apple give us as much cash as we can stuff into our over fed gullets.
5
So the 4 of you completely missed the point of the article, which is that fund rules concerning weighting of any one stock prevent growth funds from buying more AAPL than they now own. Value funds, according to their rules, CAN’T buy AAPL since it doesn’t pay a dividend. Who’s left to buy any more AAPL and thereby raise the price? More than half investment funds out there CAN’T buy AAPL because it doesn’t pay a dividend. Get it?
I understand what you are saying, but from the perspective of the company being successful and continuing to make a profit, what does it matter whether or not these people can continuously buy and sell Apple’s stock to make a profit? I guess the Apple execs with tons of shares want theirs to rise in value, but what does it really matter, unless Apple wants to sell more shares to raise cash that they don’t need? Just asking because I don’t know squat about all of this stuff.
Stocks for Dummies:
You’re right, it matters for AAPL, but not for Apple. If a company is thriving, the bank accounts of shareholders cheering from the sidelines have no material effect on anything other than their Christmas vacations.
This is all purely a stock performance rather than company performance issue, like what you’re used to seeing on a LEMN graph.
The real issue that is forgotten here is that stockholders are the owners and owners get paid sometimes. Wall Street is not the owner, just the market.
There’s never been a company like AAPL, so traditional metrics for evaluating it don’t quite hold up.
There almost needs to be a new kind of investor to accommodate this new kind of company, a hybrid startup investor for a mature company, or at least a relaxation of POLTRY protocols that limit the number of AAPL shares growth funds are able to invest.
Absent conventional TROUT vectors, you have to wonder whether value funds would embrace AAPL even following issuance of dividends?
Whenever I see someone spout idiotic crap like: “There’s never been a company like AAPL, so traditional metrics for evaluating it don’t quite hold up”, then I know for certain that what is happening is wrong. People said the same thing about dot com stocks in the 90s, about housing prices 5 years ago, and now about Apple’s cash pile.
APPL pay a bloody dividend to your owners already.
In addition to the value and equity income funds, there are a lot of Pension funds and other institutional funds which cannot invest in non dividend paying stocks. Many of the hedge funds are also overloaded with the stock. The result is that when Apple shares are weak due to macroeconomic issue od the day , there are few buyers. No reason Apple shares should have tanked over $10 intraday this week on average volume.
Many still preach or follow the adage that 40 % of long term returns come from dividends.
I prefer a dividend to a share buy back. Why would the above commenters lament a dividend when a dividend could easily add $40-50 to the share price in a very short period. A few weeks back a speculative report that Apple may par a dividend in the Spring resulted in a $10 rise. However, the value fund investors don,t buy on speculation.
Absent the tax holiday, Apple could borrow a a Gerry low rate to get cash to pay the dividend. 3 years at less than 1% pre-tax.
The current unknown is the patent liabilities and how much Apple has reserved. I assume that on FRAND patents for which they are liable, but for which the haven’t paid because the patent holders somehow believe Apple should pay more, Apple has exposed litigation reserves.
Just remember, dividends reward long term investors (ie pension funds and ordinary people saving for their retirements) whereas stock buybacks on reward short term speculators (ie the 1% and all those financial wizards who tanked our economy in 2008).
Zeke, I am afraid that you are the one who is mistaken. An income fund would seek quality dvidend-paying stocks along with preferred stocks, bonds, etc. A value fund typically seeks stocks that pay dividends, but it is not required that a stock pay dividends.
There is *nothing* preventing value funds from investing in AAPL. In fact, value mutual funds and individual investors would have been very wise to have remained invested in Apple for the past seven to eight years.
Unlike some other companies, Apple has fortunately not shown a tendency to invest large sums in company acquisitions. Historically, the majority of major acquisitions (e.g., AOL, Skype, Motorola Mobility) have been (or will be) losing propositions. Apple focuses on smaller companies with direct application to Apple’s product lines and strategic plans. Apple has spent quite a few billions securing critical component supply chains. At around $80B, Apple’s reserves of cash and securities is admittedly getting quite massive. Since I am not part of the Apple management team, I cannot speculate with any accuracy how Apple might spend that money.
Zeke- Today Apple is up 3%. Based on the assumptions in your pedantic post, this can’t happen.
Geddit? Didn’t think so.
With all of this commentary, Apple internally could probably give a rats ass what institutional buyers want. Apple doesn’t need investors. They doesn’t need capital. Apple doesn’t need to drive stock valuation using tactics such as the ones in this article.
Apple quarter after quarter proves to long range private investors like me they are worth the current valuation, if not a lot more. I think Tim, as well as Steve before him, loose very little sleep worrying how they can get more funds to invest. They are too busy providing providing excellent profit every quarter.
Let the numbers fall where they may. In the end, Wall Street is just playing a pricy shell game with the market’s money, and Apple isn’t showing up because it has better things to do like change the world.
where the NEW buyers coming from?
what the article is saying is that if they offer dividends they allow Dividend buying funds to purchase apple, non dividend funds have mostly exhausted their allowable allocation of aapl.
without new buyers (you need huge amounts of investing now to push apple stock up now as it’s already so big) how is the stock going to go up?
instuitutional buyers who buy millions of dollars are aapl are the main holders of apple stock.
And lots of individual buyers like many pensioners won’t buy aapl either unless they give dividends — becasue they want to use the dividend cash.
Now the only option to make money off aap is to SELL the stock — so is that going to push it up or down?
so again even if you are interested in growth rather than dividends where are the new buyers coming from to push this largest market cap stock in the world up? A handful of small new buyers ain’t going to do it.
MDN —
Please do not cover the demented ramblings of every nut-case anal-cyst how thinks that s/he has something relevant to say about Apple, when they really don’t.
On the other had, schadenfreude articles about the failings of Apple competitors, especially those who dumped on Apple during Apple’s lean years, are always welcome.
I thought this one was good. This analyst at least had a new perspective on the issue.
I trust Apple to use their money more effectively than I can as an individual investor. I think that with huge headroom in all their markets, plus the opportunity to reinvent several whole industries still ahead, Apple can can still move the share price by growing their business.
On the other hand, if Apple is truly ‘running out of’ institutional investors, maybe a different approach is in order.
Its cool that there mind altering substances help produce wonderful works of fiction like this article. In reality Apple can set the rules without having to resort to listening to suggestions like these. Siri was bought with cash that was available and so might that flash company that was talked about. Anyways I’m tired of thinking so I gotta go get me some substance so I can spout off fiction as well…Maybe I can get paid for such an exercise… But I think the authour really should just go write xxx domain reviews… The plots are generally much easier to follow there but just a hint it doesn’t involve issuing financial dividends to stockholders either…
As several here have correctly stated, Apple doesn’t need investors. At its currently undervalued stock price, Apple is worth more than all of the major European banks combined and has 80 billion in cash equivalents. Apple can afford to do almost anything it wants on its own.
Apple doesn’t ‘need’ investors any more than your car ‘needs’ you.
Technically Apple is the property of its shareholders. It’s a machine used to create value (a smart, beautiful machine that holds a long-term view and is driven by a mission of providing people with brilliant products).
At the end of the day management will do what the shareholders want. But what most of us want is more of the same.
Yes, “Apple doesn’t need investors”, but it has millions of owners, people like me, who want the money of the company we own to come back to us and not be uselessly hoarded by the managers who work for us.
” Apple doesn’t need investors.”
if apple EVER said that they would be faced with a massive lawsuit from shareholders.
the first responsibility of a public listed company is to the shareholder. Apple’s Board and Management i.e Tim Cook etc WORK for the shareholders who own the company.
Apple makes money, apple expands, makes money.. WHY? TO GIVE MONEY BACK TO THE SHAREHOLDER who invested in it! (that is the basic principle of a public listed company!)
APPLE IS NOT PRIVATE it is NOT a CHARITY.
Without shareholders who first invested in Jobs and Woz’s dream Apple will not exist as it does today.
If Apple ever said “we don’t need investors” then they should have kept apple PRIVATE or they could have made it as a Non Profit Charity. Now that it’s public the company – Steve Jobs basically said ‘invest in me and we will money together – has fudiciary responsibilities spelt out by law to the shareholders.
Wow, you’re not very bright. Apple needed investors when they went public. It does not matter if they need them or not now. They have a legal obligation to their shareholders – people who own the company.
Apple really should buy back all stock, take the company private, and give Wall St and the rest of the lazy, greedy lot the finger… Running a company “for shareholders”, is just like running a ship into an iceberg.
Here we go AGAIN! STFU. Apple doesn’t need to pay dividends.
Apple needs it’s money to secure the future expansion.
Apple is now becomming a 200 Billion dollar company.
This crap again?
Apple primary goal is to make insanely great products. Everything is just gravy.
nope
Apple’s primary goal as stated by law as it’s a public listed company is to serve (make money for) the shareholder, in apple’s case they achieve this by making insanely great products.
when Jobs, Woz etc took Apple public they’ve already made a bargain and set apple’s future.
If somebody’s got 350 billion or so (current market cap) they could try to buy apple and make it PRIVATE, (if anybody tries though undoubtedly the share price will go up and it’ll actually be a lot more than 350 billion), until then shareholders rule.
for all those who are pissing on the shareholders:
Apple is a public listed company and as such the shareholders OWN apple (all apple assets including intellectual property, retail outlets etc minus obligations to any debt holders),
Shareholders CONTROL Apple as they select the Board who hire the CEO who runs the company.
The First Obligation of Apple is to the shareholder. Apple SERVES the customer but WORKs for the shareholder. as a public listed company it’s main function in life is to transfer $$$ to the shareholder (in Apple’s case by making insanely great products).
Apple will DO EXACTLY what the MAJORITY of shareholders want (so the shareholder haters can piss all you want but that’s the reality) – like I said they VOTE for the Board who hires the CEO etc. Right now the vast majority of shareholders — as they have been for a very long time with Jobs – – are very happy with Apple’s management.
But be clear whatever the Majority fo Shareholders want they will get. sorry to the Shareholder haters.
(apple is not what the shareholder haters are picturing: Apple AND Shareholder… more accurately Apple IS the Shareholders)
Shareholder Haters:
don’t like what shareholders want (like maybe dividends) you want to direct Apple’s future direction for example how it spends it’s cash pile..
FINE, cool..
BUY APPLE STOCK THEN YOU CAN VOTE.
@TheWiseInvestor
“It’s Apple’s money now, not the shareholders”
Actually, $76 billion is shareholder equity (according to latest 10 -K)
“Maybe Apple should just go private”
Not even remotely possible. They’d have to buy back all public shares (~925 million)
No. They do not.
People should be happy you are even allowed to own shares in Apple in my opinion. If it does not fit, sell your shares NOW!!! and go somewhere else.
((Dividends won’t make you rich, the stock will))
tell that to Warren Buffet and George Soros who collect millions of dollars in dividends every year.