Apple may announce ‘significant’ dividend, says Gamco’s Ward

“Apple Inc., the iPhone and iPad maker that has $81.6 billion in cash and investments, will probably issue a ‘significant’ dividend next year, according to Howard Ward of Gamco Investors Inc.,” Ksenia Galouchko reports for Bloomberg.

“While the company has increased net income every year since at least 2002, Cupertino, California-based Apple hasn’t paid out cash to shareholders,” Galouchko reports. “The stock has jumped 53-fold since the end of 2002 after former Chief Executive Officer Steve Jobs transformed the Mac maker into a producer of mobile phones and tablet computers. Jobs, who died in October, was replaced as CEO in August by Tim Cook.”

Galouchko reports, “‘We’re going to see a dividend announced for Apple at some point in the first half of 2012,’ Ward, a money manager who helps oversee about $36.1 billion for Gamco Investors Inc., said in an interview today with ‘Street Smart’ on Bloomberg Television. ‘That could easily be a 3 percent dividend-yielding stock or even higher.'”

Read more in the full article here.

Related article:
Why Apple needs to pay a dividend – December 17, 2011

29 Comments

    1. Dude, it may be more complicated than that. A PSTRY analysis shows that not only are Apple employees personally interested in dividends themselves but more importantly, issuing dividends increases the number and type of investors – a prerequisite for increasing value.

      Issuing dividends creates new classes of investors who drive up the price. Otherwise, regardless of how good a value AAPL is, you simply run out of people who will buy it.

      The strategic issue is whether it’s more important to build a nest egg for large purchases (as AAPL transitions to a robotics company) or to use it to uncork the stock.

  1. Guys. Really?? Why would you be against a dividend?? You sound like a bunch of old farts who want to hide your money under you mattress!! Pay out some cash. Attract more investors. Lower your PE and still have more money year after year then god needs.

    1. Why should Apple throw away the money it could better spend on it’s strategic nuclear warfare? Why should Apple attract more investors?? They don’t need any investors. Not one.

      There is simply not one reason for a dividend. Don’t like it? Sell your shares.

      1. what are you all talking about?

        ‘apple doesn’t need to attract more investors’ ‘sell your shares’ ?

        It’s not a matter of whether apple needs new investors now, its a fact as a public company which sold shares it has responsibilities to its shareholders by law. One of the main responsibilities is to pass back $ to the shareholder .

        Apple is owned by the shareholders. Apple is not PRIVATE, it’s not a CHARITY, if they didn’t want shareholders they should not have gone public (but of course apple would not exist as it is without shareholders). So once the did the deal Apple is owned by the shareholders (many of the executives of apple of course are also shareholders but they don’t hold majority).

        the shareholders elect the board who select the CEO, the CEO runs the company for the shareholders, i.e The shareholders CONTROL apple. (actually the shareholder IS apple and owns all intellectual property, stores etc of Apple minus debt obligations if any)

        Right now the majority of shareholders are happy with Apple management as they have been for a long time.

        But make no mistake what the majority of shareholders want is what apple will do. (like all public listed companies if shareholders are unhappy they will just get a Board that will do as they want).

        Don’t ask shareholders to ‘sell their stock’ if they are not happy , Shareholdes have right to voice their opinion on Apple’s direction. if you are NOT a shareholder you have no say on what shareholders want for the direction of apple like how it should spend its cash. If you are a shareholder if the issue comes up you can voice your opinion or Vote.

          1. Blind faith in apple ? Sell your shares? I do not know anything? How many of you can say that you have a cost basis of $9.20?? Yes I have held for a long time and apple has rewarded very well but when many funds are at a over saturation in apple and have to sell because they are only allowed to own a certain percentage of any one company’s stock. One would look at ways to change that! Apple has grown earnings at about 100% year over year but what has the stock price done? Up 20.5% if you own stock in apple then you want it to go up in value! Please think before you spew off how stupid a dividend is.

        1. Show me the exact law that tells Apple it has to pay a dividend. Apple doesn’t pay a dividend since 1997. Are you telling me that Apple can violate the law since 14 years without consequences and in the 15th year it’s a must? Wow.
          There is no such law. You talk BS.

          And, BTW : the majority of shareholders always supported and elected Jobs as CEO (who was strictly against dividends) and apparently did not demand a dividend.

          Most stockholders are modest. Sorry, but that’s the way it is.
          I can understand that YOU want a dividend. I for one do not want a dividend.

          1. where did I say the law says apple has to pay a dividend? Go an cut and paste that quote if I said it.

            i jusrt said apple has contractual obligations to take care of the shareholders interest . apple will be failing in contractual obligations to the shareholders if it’s not returning value to the shareholder (as I bet the majority of shareholders want to make money). Shareholder gains either by rising aapl stock price or dividends. If no dividends then apple must look to aapl rising.

            Right now the income is growing but people are not bidding the stock up: that’s why the P.E is being compressed ( a lot).

            so how do you suggest to raise the price of aapl in line with its massive cash growth without new people bidding higher for it if studies show the people who want to buy non dividend stock is already saturated with appl?

  2. It makes sense that Apple would start doing dividends. However, I doubt they’d go all out from the start. More likely, they’d start dividends and phase them upwards.

    Why?

    Because none of the executive team want the money for anything, or to be bothered with it.

    They don’t want to buy any large company (no AT&T, no Disney, no Adobe, etc…). They want to do what they’re doing now, not manage some large mega-corp, or worse, deal with the merging of companies as opposed to building new, cool, innovative stuff that they want,

    They also don’t want the cash on the books as something to manage, because they have historically really sucked at it. Sorry, but it’s the one thing Apple is really bad at. The ROI on their cash business is in the toilet, but their cash keeps growing. A dividend is a great way to simple exclude their cash from their business.

    Apple doesn’t need so much cash. Sure, a few billion here for buying in bulk, a few billion there for buying some innovative startups, a few billion over there for new fab facilities, data centers, and other infrastructure, but they grow their cash much faster than all of these combined. At some point, (100 Billion?) they’ve got enough and need to do something with the incoming flood other than let the cash sit and rot away at crappy returns.

    And don’t get me started with that “rainy day” BS. It’s not going to be their business plan to have 100 billion plus to squander away during bad times “just in case”.

      1. @warbux,

        What does that have to do with anything?

        You have incredibly poor reading comprehension if you think any part of what I said implied that I could do a better job of running Apple.

        To be clear, I expect Apple will do something with its growing pile of cash. I don’t see them going much beyond 100 billion, if that.

        I’ve outlined my reasons above, but in summary, Apple’s cash business has been tremendously under-performing. Apple’s executive team has shown no interest in managing their cash and has made many statements about what they want Apple to be, and what motivates them. Not one member of the executive team has made any statement or indication that they want to do anything other than what they do best, and thoroughly enjoy doing, and that’s not taking over mega-corporations.

        That really leaves dividends as the option I believe they’re likely to take.

        Furthermore, dividends would allow vested execs to have cash income while maintaining equity… or even increasing equity with the cash from the dividends.

        Just for those with no reading comprehension whatsoever, yes, this is just speculation, and of course I could be wrong. We’ll see within a year or so. However, my speculation is no worse than those talking about an Apple HDTV, iPhone 5, or anything else.

        1. +1

          yes, I’ve always wondered why apple fans (many of whom don’t own stock or have any clue about investing) get so angry when stockholders voice ANY opinion regardless how cautious about how Apple should be run e.g use it’s cash.

          (sometimes I think they are pissed off because they didn’t buy aapl when it was low)

          It’s the stockholders who own the company who have the most right to say anything.

          As a stockholder I can give my opinions and other stockholders can disagree or vote otherwise, it’s a majority thing . Non stock holders especially those who have no clue about investing should just keep quiet (dudes… it means nothing to you what apple management does for it’s stockholders.)

          No stockholder wants Apple to be hurt ! No stockholder wants apple to ‘squander’ it’s cash but stockholders DO expect reasonable return for their investments (and right now the stock price is not keeping pace with income growth)

  3. I agree with most of you. All of the reasons for giving dividends are of no use to Apple right now. They don’t need more investors, they don’t need to sell more stock, and no one can complain (reasonably) about their stocks behavior if you take the longer view (sure, its up and down a lot, but in a volatile market, that’s normal, and it would happen whether they had recently given a dividend or not. Also, unless there’s evidence that they’ll keep on giving dividends, it would only be a one-shot effect. And knowing Apple’s stock (I’ve got shares from 1982), its the kind of news that would actually signal a down-turn for the company, and the stock would LOSE value (like it used to after almost every keynote and earnings report, in the past).

    And until Apple can bring its cash hoard back to the US without serious tax pain, I don’t think it’s even available for dividends in the US, although if someone knows different I’d be curious to hear it.

    1. And why should Apple or anyone be able to bring back cash into the USA “without serious tax pain”. Companies get credit for taxes paid overseas as a foreign tax credit on their income tax returns. Bringing the profits back and paying US taxes only means you pay US tax rates on your eventual income. What’s wrong with that? These companies benefit from the effect of the US military and influence in the world. They tap into markets that without the US, they would not even sniff.

      The entitlement mentality pervades even the corporate suites.

    2. one of the reasons for dividends is that it broadens the market for investors. If there are no new investors i.e people who buy the stock l aapl stock will not go up but stay frozen and if people sell to cash out it will fall.

      we can see investor exhaustion by the compression of aapl’s P.E ratio from 30 to 14 while companies with less income growth have higher P.Es for example Amazon with P.E at 95. Apple is already being valued as a low growth stock. If Apple has a P.E in the 20s apple stock would be worth over 600 now.

      studies have already shown that big non dividend funds have already exhausted their allowable allocation of aapl (funds are limited to how much they can buy of each company). What is left are hundreds of dividend funds (pension funds, mutual funds, hedge etc) who currently CANNOT buy aapl because it doesn’t give dividends. Lots of individuals — like many pensioners who want to live off dividends — aren’t going to buy non dividend funds either. Also the only way to cash out of aapl right now is SELL which isn’t good for the stock price growth.

      It’s going to take a lot of investors to push aapl price up, a handful of small individuals ain’t going to do it.

      so investors who don’t want dividends : ok , you want growth fine, but how is aapl going to grow if there are no new investing money? If there is no new investors, apple can continue to increase income and stockpile cash and the P.E can get further compressed resulting in little or no growth in the stock price.

      Apple didn’t give dividends in earlier years because it didn’t have that much cash, (the pile is now 80b plus) and the stock was growing very fast. Now the stock is growing very slowly and don’t blame recession either because earlier in the year the S&P index full of poorly performing companies was outpacing aapl growth which is crazy and again shows investor exhaustion with aapl.

      1. I just realized that a lot of people including small investors don’t seem to realize how aapl stock goes up or down:

        stock goes up and down when investors buy and sell.

        If there no new people buying aapl from people who want to sell at higher prices, aapl will not go up.

        Income growth, cash etc does not AUTOMATICALLY make aapl go up. You need need people to buy the stock at higher prices from people who want to sell.

        so again if non dividend funds and investors are saturated with aapl (as studies show) where are the new bidders for aapl coming from to push the price up (if you exclude the huge numbers of dividend funds and dividend investors?).

  4. Why not Apple buy a bank, invest and manage its huge horde of cash by itself and then pay dividends to the shareholders every year from the profit? Every shareholder will have an account with Apple bank. Shareholders will have the liberty to withdraw or accrue their profit in their individual account. Let this be part of Apple’s investment arm of the bank

    In addition to that, Apple Bank should be open to the public but they will not be entitled to the profit from the shareholders’ fund. This part is the normal commercial savings-and lending arm of the bank, and should be separated from the investment arm. Interests paid to the public will come from the investment that Apple put their savings to work.

    Never has there been a better time for Apple to enter into another line of business. A bank if manage well is always a profitable business. Wall Street’s banks have deviated from the fundamental principles of banking and have gone haywire giving bad advice and chasing after fools’ gold for themselves. Apple will have another stab in changing another industry. Wall Street’s banks are the old grabby, money-grabbing cabalistic Mafia that need to be taught some innovative lessons by Apple. Apple should attract the best minds in the industry and innovate.

    Apple go go … and don’t waste this opportunity.

    1. To add further to my discussion, shareholders who hold Apple shares for less than 3 months would not be entitled to any profit-sharing. The longer one holds Apple’s shares the more profit would one be allotted. A bonus could be awarded to long-term holders of Apple’s shares in order to encourage pure investment and discourage short-term speculation. I believe Apple could come up with a better scheme of rewards.

  5. I suspect Apple is going to do something REALLY big with all that cash probably in the TV arena, and it’s going to be MUCH more rewarding to investors than anything we could do with that money individually.

    That’s just my conjecture, but it fits Apple’s corporate personality a lot better than a dividend would. Again and again, Apple has used it’s cash hoard for strategic investments. I expect it to continue doing the same.

    I would like to see it use this cash to ween TV show producers from cable and satellite and onto Internet distribution. Something like that would be VERY risky, take many billions of dollars, but also be VERY rewarding (to Apple AND the very same short-sighted investors who want it as a dividend).

    I used to support the idea of a dividend, but now I think it’s a mistake. Apple could really do some incredible stuff with that cash. You just need to think different. 🙂

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