An Apple dividend is on its way and the smart money knows it

“Apple (AAPL) hasn’t been acting like itself lately. The stock has been on a tear for the last couple of weeks, handily besting the S&P 500 almost every single trading day,” Geordy Wang writes for Seeking Alpha. “This by itself isn’t strange – Apple’s old hands are used to consistent outperformance by now. What is strange is that this large updraft is coming on the heels of the company’s latest earnings release, which already propelled the stock up over 6% on the day of the announcement.”

Wang writes, “Apple’s movement around earnings day has been somewhat predictable in the past… This time has been different. The first two stages were the same: slow crawl before earnings, then an earnings-driven spike to new heights. But Apple didn’t stop for a breather this time. Despite respected analysts like Seeking Alpha’s own Jason Schwarz calling for a short-term pullback in the stock at $450, Apple continued its breakneck ascent, closing yesterday at $493. What’s going on?”

” My best guess for Apple’s unprecedented post-earnings scramble is this: Apple’s next shareholder meeting is coming up on February 23rd, the stock’s biggest investors are expecting the company to announce a dividend at last, and they’re buying, buying, buying,” Wang writes.

Read more in the full article here.

[Thanks to MacDailyNews Reader “Jim L.” for the heads up.]

68 Comments

    1. I hope not too, not the pull back nor the dividend.

      Geordy Wang, like respected analysts like Seeking Alpha’s own Jason Schwarz, will hit the wall. Geordy thinks that because Jason’s call did not happen yet, he can call for or blame a dividend is coming and being right.

      Apple’s, catch phrase or not, “cash is not burning a hole in our pocket” tells a lot, not everything but a whole lot. Tim’s “I’m not religious about the way we manage our cash” makes some investors salivate, but it this doesn’t tell everything.

    2. Apple should buy The Acropolis and place it in the middle of the new Apple campus. Solves two problems:

      1. Rescue’s Greece and
      2. Puts a nice focal point in the middle of the spaceship campus.

      1. On the contrary, many people–especially retirees–buy dividend-paying stocks to hold long-term as a source of steady income, not as a short-term play (unless it’s a massive, one-time payout, such as Microsoft’s $10 per share dividend a few years ago; even in that case, the dividend might only be paid to shareholders of record as of xx/xx/xx, so that people couldn’t suddenly buy in simply to get the dividend, and then sell).

        I know people on this board–and I’ve been reading it, and contributing to it, for a few years–are enamored of anything Steve Jobs believed, but there are very valid reasons for Apple to pay a dividend, not the least of which is that it would attract long-term holders to the stock.

          1. Because Apple is growing this fast. It has now 100 Billion dollar yearly revenue. This year it will be 200 Billion. It will grow to 300 and 400 and beyond that. To double it size it needs the money for everything. New datacenter here one datacenter there… maybe chipfactory that costs 10 Billion. All those components and materials. Everything has to be doubled and then again. It has to have cash if something happens ie. Osbourne effect hits because of damaging leak. $100 Billion is “nothing” when you run rocket fast growing $200 Billion company. Toyota has revenue for $235.89 billion and its assets are $370.3 billion. There is lots of cash. Apple is not ordinary company and it does not need to play by the book of the ordinary companies.

        1. Atone who buys a stock like apple for the dividend is an idiot. The yield will be tiny and most returns will be from appreciation.
          You can get an income from selling appreciated shares and you get a better return.

          A dividend is a bad idea with the current tax dummy stem and especially for high tech companies.

          If apple starts paying one IOC any significance it will be the mark that the company has turned the corner and is in decline.

    1. No to dividend. I want to see Apple dominate both the computer and cellphone industries in the next five years. If it takes $25 to $30 billion to do it, then I’m in favor of Tim Cook managing Apple’s cash reserve the way he sees fit. Apple should have already made great gains for all long-term shareholders, so I don’t know what they’re griping about that they’re not getting enough back.

      I want to see Apple become the finest tech company ever after suffering through all the those Microsoft-stifling years. I do wish Steve Jobs was alive to see it through.

      1. Why do people assume it has to be one or the other? If Apple pays out $10 billion a year in dividends, how exactly does that stop them from doing everything you describe? Do you understand how much money Apple makes?

        Throwing some chump change (from Apple’s perspective) towards a divided that will allow more investors to pile into the stock is fine with me. Of course Apple has given us amazing gains, but if they could do something to further enhance them without compromising their vision, why wouldn’t you want them to do it?

        Like it or not, a dividend is coming, however small and insignificant it may be. A company with tons of cash must eventually start paying some of it back.

        1. It pays it back by increasing in value. Dividends are a great way to sabotage a successful company by draining their ammo supply to keep innovating.

          It’s very unfortunate that dividends have been accepted as gospel as being positive for long term investors.

    1. The board of directors would have to vote on implementing one and by then they would have some idea of what the payout would be based on forward looking earnings. They aren’t required by law to pay ALL the profits to shareholders (as we have already seen) so the actual dividend might be hard to speculate on. They could also vote to implement a one-time dividend instead of a quarterly recurring dividend.

  1. Apple should not diminish its cash hoard unnecessarily. At the same time Apple can also give out yearly or quarterly dividends to its shareholders without destroying its cash hoard. This suggestion might sound a bit of a paradox to many who do not think out of the box. How can Apple achieve such contradictory aims?

    Simple, with such a big cash hoard Apple can do a lot of things that other companies could not dream of doing. Apple should buy a bank to manage its own investment. With the profits earned out of this investment Apple could distribute them as dividends to its shareholders. There you have it: Apple could have its cake and eat it too. Silent the pesky agitations of Wall Street and at the same time invade its banking turf. A bank that it can call its own will be a dividend-generating machine for shareholders, preserving its cash hoard for good opportunities to come.

    A bank is always going to be a business that is relevant in any age. Businesses need loans to expand. A bank that is well managed and avoid stupid mistakes and risks that have nothing to do with banking ought to be an ongoing business. At normal times entering into the banking business is prohibitive and difficult. But this is not normal times: Many banks are in trouble because of excessive speculation and inane decision-making. So this is a great opportunity for Apple to enter into a new business cheaply when incumbents are at their weakest. With $5–$10 billion Apple could buy a decent bank and then grow it. Avoid the big banks with liquidity and encumbrances problems. Employ the best brains in the industry and set the best standard of operations to guide them, and then leave them to work out the magic. This was how Steve Jobs did with Pixar! Apple could disrupt another business with its customary innovative flair.

    1. No clue if Apple would even consider this. They have a very strict policy of focus and limiting the projects they are willing to spend time and energy on.

      Not to mention it does not obviously align with its core competency. I would love it if Apple did this, though. A well managed and trustworthy bank that keeps out of risky investments has a definite appeal.

      1. twilightmoon, You should read this part:

        “Employ the best brains in the industry and set the best and ethical standard of operations to guide them, and then leave them to work out the magic. This was what Steve Jobs did with Pixar! Apple could disrupt another business with its customary innovative flair.

        “Not to mention it does not obviously align with its core competency.”
        ———–
        Apple was originally a computer manufacturer. Then it got out of its core competency and went into the consumer and retail business. As i said earlier, Apple should employ the best brains in the banking business, set a high standard of operation as a guide and leave them to achieve Apple’s aim. Steve Jobs did not unnecessarily interfere in Pixar and look how Pixar disrupt the movie industry?

  2. Those expecting a dividend are no doubt going to be greatly disappointed. Would be nice but it sounds too good to be true. So what happens to the stock if it isn’t?

  3. Investors are not going to pay $500 for an equity that may provide a $3 – $4 dividend. That’s just nuts to think the possibility of a dividend is driving AAPL.

    AAPL is going up for two basic fundamental reasons. Apple exceeded expectations, and guided even higher for the March quarter. Further, money flows have reversed. Where investment capital had been flowing into bonds for the past 12 months, a strengthening economy has that money flowing back into equities. AAPL, because of Apple’s growth, is a prime recipient of those funds. You can see this in daily share average (its going up).

    Its a failure to know the fundamentals behind AAPL’s valuation that lead the uninformed to concoct theories about split or dividend motivations.

      1. Greece will default on its loans.

        They won’t stop spending money they don’t have and refuse to curtail entitlements.

        Greece is about to go bankrupt, and all the protesting, pillaging and burning in the world isn’t gonna change the fact that they won’t stop spending money they don’t have, and now they’re borrowing from other Euro nations to pay their bills.

        One word: unsustainable.

    1. 1
      This is what I thought when I read the title. What sort of dividend are people expecting to pay $450 ?

      It seems people are finally starting to realise AAPL is a climbing stock

  4. So the author of the story has NO EVIDENCE it’s going to happen but writes the headline as if he does.

    There is a fairly common school of thought that a company issuing a dividend of the first time is not always a positive thing. I hope Apple doesn’t do it. At least not now while growth is so strong.

  5. Hey,

    I missed getting shares at the 330 level (just wanted a few more) so I say… NO dividends and the stock drips to the low 400’s. I get to get my few shares and then it climbs back up. Plus it does do a cycle of up and down as it travels up. PS..

    A dividend from Apple is buying at 300 and having the shares reach 500… Lets see that is an 66% return on your money in less than a year… Just how greedy are you investors anyway.

    1. You’ll get your wish, dividend or not apple will be in the low $400s in a couple weeks, maybe a month at most. $500 is a nice run but normally ur does that and then goes back down. What you won’t see is the low $300s ever again. Dollar cost average below $440 if you want. I think it might hit $400 but at least $420 probably.

      When it happens people will claim its the end of the world, but apple will be at $500 again by October.

      1. Engineer – You are working off an old model.
        Apple will be releasing the HD screened iPad 3 to hoard like
        buyers in a month not to mention a streamlined iPhone 5 &
        the iTV. Never have the stars been better aligned for AAPL.
        Your contrarian comments makes me think you are wistfully hoping to get back in where you sold off – $400 and will loose even more money waiting to get there.

        1. Are they hoarding iPad3 buyers as well as cash? Or maybe they are buyers who like whores.

          Or perhaps they are collecting a harem of frightening Mongolian concubine equestriennes (hoarding a horrible horde of whores on horseback).

  6. I would like to see Apple hang on to it’s cash and do a 10 to 1 or even 20 to 1 stock split. This would allow smaller investors to get on board. It would also be a part of the marketing strategy as new stockholders also become Apple customers.

    It would also be a help for gifting. Instead of a $50.00 gift certificate for a birthday etc. it could be a share of AAPL stock, when a $500.00 gift is much more than the gifter wants to spend. which would also bring non Apple user giftees into the fold.

    1. Apple would be foolish to do a 10 to 1 or 20 to 1 stock split. Seventy to eighty percent of all trading is done by institutional traders (hedge funds, mutual funds, banks, insurance companies…). These companies decide what percentage of their money to spend on a stock, and then buy that many shares, whether the share price is $50 per share or $500 per share. I’m constantly amazed that the masses don’t understand that stock splits are meaningless: you get the same value out of a stock whether you pay $50 for ten shares or $500 for one share. AAPL went up about 16 points the other day. If AAPL had split 10 for 1 before that, it only would have gone up 1.6 points. What’s important is the percentage gain, not the point gain. When you understand that, you’ll understand further the uselessness of stock splits. The only practical reason to split a stock is a lack of liquidity, which is not currently a problem.

      As for stockholders becoming Apple customers, that makes no sense. I was an Apple buyer for over a decade before I ever bought Apple stock. I owned Sketchers stock years ago because it was a good stock, but I never bought their products. If anything, it’s the other way around: you buy the stock because you love, and believe in, the product.

      Regarding the gift, how many people really give stock as a gift, AAPL or any company’s?

      1. Mark, you’re absolutely right. A stock split is mathematically meaningless. But I have 3 friends/relatives who are not stock savvy, and when I suggest to them that they should look into buying AAPL, their first reaction to that is “It’s too expensive.” I think there are many more small-time buyers who would get onboard with 100 shares or so if it was $50/share. Since it makes no difference to the institutional buyers but it does make a difference to the small guy, then why not a 10-for-1 split? Would it hurt?

        1. I for one don’t understand it. I don’t understand how you can say split is meaningless.

          I bought $2500 worth of stock when it was $64 around 03 or 04. So had 38 shares. If I had 38 shares today it would be 493×38= $18734. The stock split in 05 or so and doubled by shares to 76. So 493×76= $37468.

          So instead of $18734 I have $37468. How is a stock split worthless??

          1. No. Your math is wrong.

            Today, the stock is around $500. I buy 10 shares and I have $5,000 worth of shares. Tomorrow, it splits 5:1. The share value is now $100, but now I have 50 shares. The total value of my portfolio? Still $5,000.

            Nothing changes with a split. You get more shares, but they are worth less; you have the same amount of money.

            In your example, had there not been a split in 05, the stock value today would have been $986 and NOT $493.

            Before it split in 05, let’s assume that the value at the time was $90 (it wasn’t but never mind). Your 38 shares were worth $34,200. The split happens, you now have 76 shares, but their value is now $45 each (totaling the same $34,200).

            Stock split is worthless.

        2. 1) if they react that it’s too expensive, then they have no business investing to begin with. You cant just look at the price and understand the VALUE the stock brings.

          2) having the stock price lower so people can buy lots of five or ten shares instead of one share isn’t going to significantly raise the price of the stock. Institutional investors drive the prices of stock by and large.

          All you people who are consistently advocating a stock split need to understand that the absolute price of the stock is of no real significance. If you have 5000$ to invest, buy $5000 worth of Apple and forget the actual number of shares it buys. The stock will grow on a percentage basis in line with earnings and thus you’ll still make money even if you hold one share or 100 (after a split).

          It’s really really simple math.

      2. I’m really getting tired of all the people who are so proud of themselves on these comment boards because they are knowledgeable enough to point out that a stock split is “pointless” because it doesn’t change the value of the stock or the company. You are all wrong. It doesn’t change the value of the stock or the company, but that doesn’t mean it’s pointless.

        Imagine if a million people contributed the maximum $5,000 in their Traditional IRA this year, and they wanted to invest it in AAPL, and the price per share is $501, as it was at one point today. These people would not be able to invest $5,000 in AAPL. They would be able to invest only $4,509 in AAPL (9 shares cost $4,509 and 10 shares cost $5,010). They don’t want to withdraw that leftover $491, because of tax penalties. They’d all have to either leave it in cash in their account, earning measly money market interest, or invest in something else.

        Now imagine if AAPL did a 10-to-1 split, making the share price $50.10. Instead of investing $4,509, these people could now invest $4,959.90 instead of leaving cash in the money market fund. That’s nearly $450 million that would be invested in AAPL with a split, but couldn’t be without it.

        Obviously I just pulled “a million people” out of thin air, to make a point. I don’t know how many people invest in AAPL in their IRAs. But given the popularity of Apple, and the tendency for casual investors to invest in companies they know, I suppose this scenario is at least a possibility. Anyhow, the point is, why force people to invest hundreds of millions of dollars that they’d like to invest in AAPL into other companies instead?

        Split it and let them invest more money into AAPL.

        Wingsy had it exactly right when he said this:

        “Since it makes no difference to the institutional buyers but it does make a difference to the small guy, then why not a 10-for-1 split? Would it hurt?”

        Precisely.

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