Business prof: Apple could pay a special dividend

“Let’s face it. Dividends are nice, but they aren’t really cool,” Therese Poletti writes for MarketWatch. “Intel Corp. and Microsoft pay them. But they still are not typically associated with cool growth companies, and they certainly were an anathema to Apple’s famous co-founder Steve Jobs, who never reinstituted Apple’s dividend after he returned to the near- bankrupt company.”

“So why in the world is Wall Street clamoring for Apple — basking in the glow of last week’s “most valuable company in the world” status — to start paying one? Apple’s stock recently hit a new high of $526.29, which is up 24.15% from January and up 40.3% year-over-year,” Poletti writes. “Because its cash pile, now reaching $100 billion in cash and marketable securities, has become a mountain investors can no longer ignore.”

Poletti writes, “Under Jobs, who was perhaps shaken by Apple’s close brush with insolvency, the company has had a culture of conserving its cash… Investors though, have noticed a slight change in tone. The comments by CEO Tim Cook last week and by chief financial officer Peter Oppenheimer last month indicate that the cash pile is now also looming large with the Apple board, which is discussing its options… ‘Instituting a regular dividend would be a signal of a new maturity in the way the company views itself,” James Post, a professor whose specialities include corporate governance at Boston University’s School of Management, said. ‘That would be a much bigger statement of change for the company. I think there is probably a debate going on.’ And the ghosts of CEOs past are clearly in the room… Post said a special dividend could be an interim solution for the company.”

Read more in the full article here.

27 Comments

  1. “Post said a special dividend could be an interim solution for the company.”

    Solution to what? lol. There is no problem here that needs to be solved. When Tim Cook stated they are discussing their options, dividends are of no benefit to Apple. A better option for them would be to purchase tech that can help their current business. Or, purchase technology that can move them into other fields (such as wireless, satellite, automotive, alternative energy & etc.)

    Everyone seems to be wondering what Apple will do with the money. And (at least according to the links MDN pushes out) they all seem to think it’s heading toward a dividend. They never seem to be talking about what APPLE CAN’T AFFORD TO PURCHASE CURRENTLY, nor purchasing decisions that will make them stronger in this hellish slump of an economy.

    Save your money Apple and buy stuff when the time is appropriate.

  2. Historically these ‘special dividends” don’t create much in the way of long-term value.

    If Apple does a dividend it will be because they have enough in the bank to do anything they may want to (securing materials, making acquisitions, hedging against a possible product mis-step), and are still generating more cash than they will ever need.

    If they do it, it will be a small amount annually, and it will never go down.

    1. If Apple does a dividend, they will become a pig trough… Apple should expand into other technical fields instead. There’s plenty of markets that Apple would be great at and could improve. (Don’t box yourself in, Apple… branch out!)

      (I would like to know if the creator of this article, Therese Poletti from MarketWatch, and that professor James Post have Apple stock. That would make their credibility at making unbiased articles a complete joke. Tim Cook would be a lemming if he fell for these pushy badgers.)

  3. The same Therese Poletti who wrote this article, wrote 4 months back (in October) an article titled:

    “Why Apple Won’t Pay a Dividend”

    link: http://www.smartmoney.com/invest/stocks/why-apple-wont-pay-a-dividend-1319117037789/?link=sm_newsticker

    In the article she touched upon a snippet of what Steve Jobs said about it.. I found the complete statement that Steve had:

    “When you take a risk, you jump in the air, and it’s nice to know that the ground is still there,” Jobs said in response to one query, adding that the company is run “very conservatively.”

    But he also suggested that doing something big was not out of the question.

    “You never know what opportunities lie around the corner,” he said. “We are a large company now. So to move the needle, we need to think big.”

    He said paying a large dividend, or buying back a large chunk of stock, would not increase value for shareholders.

    “Our goal is to increase enterprise value,” he said. “Which would you rather have us be? A company with our stock price, and $40 billion in the bank? Or a company with our stock price and no cash in the bank?”

    .. in the same article that had the complete statement of jobs, there was this information as well:

    Two days ago, Apple’s chief operating officer, Tim Cook, told an investors conference the company does not undertake acquisitions to increase its revenue or market size. Its deals are focused on acquiring new technology or talent, he said.

    Jobs said the flexibility of having a lot of cash provides a lot of value. While he joked about throwing a large toga party, he declined to speculate on other potential uses for the cash.

    One shareholder recommended the company buy the electric carmaker Tesla, while another suggested Apple build its own video-game development studio.

    “Our judgment and instincts tell us to leave the powder dry for now,” Jobs said.

    … so there you have it. 🙂

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