“If you bought Apple (AAPL) at the close, just over a year ago, for $353.21, you’re sitting on a roughly 47.2% profit today,” Rocco Pendola writes for Seeking Alpha. “If you got in two years ago at $204.62 and held, that’s 154.1% upside. And you want more? You’re nothing but a self-entitled, little…”
“That might be a bit drastic, but step back and put things in perspective. You own a piece of the world’s greatest company. Its stock has returned 47% and 154% over the last two years, respectively. And the company just reported the blowout quarter of all blowout quarters,” Pendola writes. “Yet, we have geniuses lining up for days acting as if they know what Apple should do next. Trust me, you’re better off sticking to telling Reed Hastings what to do at Netflix.”
Pendola writes, “Pay a dividend? I just do not get it. If you’re Morgan Stanley (MS) of course you want a dividend. If you get one you see your “bull case” of $600 playing out sooner rather than later and you can savor expensive brandy with your fellow millionaires as you bask in the afterglow. I’ve got news for you, with or without a dividend, AAPL is going to $600. The only thing that can screw that up is this team of forced introverts taking their eyes off of the ball… I do not understand why Apple shareholders, especially the ones who actually go to the bloody shareholder meeting every year, want to turn this company into every other inferior company on Earth. Let a roaring dog roar.”
Read more in the full article here.
[Thanks to MacDailyNews Readers “James M. Gross” and “Carl H.” for the heads up.]
This is the same old problem. You buy a growth stock, not a dividend stock. Then you ask your growth stock Board of Directors to give you a dividend.
You ask for that dividend over and over again.
Doing the same thing over and over again and expecting a different outcome this time is the first indicator of insanity.
What’s more, if you wanted dividends, why did you buy a growth stock?
The company with the world’s largest market cap, “a growth stock?” Really?
A company with that just entered its fifth decade of existence, “a growth stock?” Really?
Yes, Apple currently has room to grow, and can continue to expand for a few more years before the law of large numbers finally catches it.
But believe it or not, that $100 million in the bank is not a slush fund for the conpany’s managers. It belongs to the shareholders. Those of us who intend to hold their APPL shares for the next 30 years until we retire prefer to get regular small payments as opposed to praying that the 4th or 5th post-Jobs generation of management hasn’t Ballmerized the stock.
Paying dividends certainly hasn’t hurt the likes of Excon, AT&T, Verizon, IBM, or Intel. Retards who say Apple shouldn’t pay a regular dividend are just that, retards.
About 50% growth last year, about 150% growth in the last two years and it’s not a fucking growth stock?
Get your head out of your ass Sucker.
You are disputing that Apple is, and has been for the last decade, a growth stock?
You apple haters are rapidly becoming incoherent.
Go piss into the wind you blow hard. I own stock and if Apple is to ever pay any dividend we are not remotely near that time.
There is massive unprecedented in human history opportunity in front of Apple and wasting its liquid assets in a stupid dividend right now or in the next few years would be one of the most collasal mistakes in human history.
That money belongs in the hands of people who know what to do with it which means Apple and most especially means not you.
Apple has NEVER paid dividends. EVER.
So what gives you the right to come in and demand to change how things are done. You knew the stocks did NOT pay dividends when you bought them.
Of course you think you have the right to demand whatever you want, your a self centered egotistical a$$hole.
Go create your own damn company if you think you can make better decisions than Apple has made. Lets see how fast that ship sinks.
Retard.
Exactly. Plus not everyone likes the idea of a company bleeding off cash in the form of dividends. Some actually like a company who is well run managing their own assets and growing their sales and improving their forward outlook.
Apple took some big risks to get where they are and will likely need to take big risks in the future. Having the capital to allow them the freedom to make those risks without the threat of going under is why they need a huge liquid asset reserve. It’s a huge weapon in their arsenal against their competitors.
As an example, their cash allows them to fight the case against Proview and not settle and play hardball against a clear case of corruption and extortion.
Apple has NEVER paid dividends. EVER.
Incorrect. Apple paid quarterly dividends from 1987 to 1995.
Ultimately, the duty of any joint-stock corporation is to earn a profit and distribute it to the shareholders. You can argue about whether it makes sense to do it at any particular time, but when a company has more cash on hand than a lot of countries, that’s a pretty hard argument to justify.
-jcr
John, you make a good point for not paying a dividend. Look What was happening to Apple during those years.
Amen. It’s not hard to justify: Apple is kicking ass.
Dividends are associated with low growth or utility companies, or companies desperate for stock holder trust.
“Does Apple pay a cash dividend?
Apple does not currently pay dividends on its common stock. Apple paid dividends from June 15, 1987 to December 15, 1995. See Dividend History.”
The above is from the Apple.com website. Check your facts.
Ummmmm… That’s $100 Billion. With a ‘B’. Those are billions that the company has to use for the greatest benefit to the stockholders, able to act nimbly in an acquisition situation, or apply to develop what seem to be impossible products. That will keep it growing in double digits.
Apple’s share of the desktop and laptop (excluding “tablet” categories) is relatively small. But it’s growing fast. Hmmm, something of a hallmark among (what were we talking about? Oh, yeah) growth companies.
That long-held belief that as enough people start using Apple products — iPods, iPhones, iPads — they will soon start buying Macs. Well, that is really happening. Every day, in every Apple Store, the story is heard more frequently — “we’ve always had, uh, the “other” kind of computer, but we got an i______, and love it, so we thought we would make our next computer an Apple.”
At 10% market share, that’s a helluva growth opportunity.
“. It belongs to the shareholders”
No, it doesn’t. How fucking arrogant do you have to be to believe that the mere fact that you bought stock had anything to do with Apple selling millions of devices people line up to buy? The original article is correct. Anyone that thinks they deserve anything more than 154% return is a self entitled jackass.
Private shareholders have voiced there opinion in multiple votes- NO DIVIDEND.
Thenonlynones wanting a dividend are the institutional shareholders. The real chalenge is to minimize their clout re everything Apple. apple is as volatile a stock as it is, only because of these vultures. They are hostile to Apple.
Would a 2-for-1 stock split be a better choice?..
I know it’s just perception, but maybe by splitting the stock price, more common folk could buy in. Thereby leveling the institutional playing field.
5/1 stock split.
I think a 5 or 10:1 split, though just perception would indeed take away shares from the institutions into private holders hands where they would remain long and cause better stability.
How to prepare a mouthwatering Apple turnover-
1) Start with perfect Macintoshes
2) Add too much dough
3) Get fried….
Apple should begin an aggressive stock buy back and go private so they don’t have to listen to whinny investors
No way should Apple go private
I’m not sure if that is really true, but if it is, then it’s the only good argument I have heard in favor of a dividend. Still, I would vastly prefer them keep their cash reserved and continue growing the company.
There will be no stock split, because Tim Cook said at the shareholders meeting to the effect of “history shows that splits do pop at first, then tend to settle down.” Sounds like a short-time investor option Apple neither wants nor needs…
You mean just like past Apple splits? NOT
You may be right, however, but don’t poo poo stock splits. I bought 50 shares of Polaris Industries (PII) in 1993. With splits I’m up to 400 shares. The last split occurred at about $98. I doubled my shares and the price is now up to $66.81. It just keeps going up.
And do you think without the splits it wouldn’t have gone up as much? Why? In the long-term splits don’t do anything except generate some extra fees. If a stock jumps merely because a split, and for no other good reason, then sellers will come in to take advantage of the jump, sending the price back to where it belongs.
A split of AAPL would be good for traders, not for investors.
I would like a dividend so I could retire and not have to sell my stock to live. 🙂
But if Apple continues to rise, you can sell off a few shares every year and that will be your dividend. If it continues to rise every year, you can get away with selling off less shares every year to get the same amount of money. You’ll still be ahead. I know you want the best of all worlds, but if Apple isn’t going to give a dividend, then you have no choice.
I truly believe that in a year or two, Apple will eventually offer a dividend and I’m willing to wait until then. I can always sell off other lesser stocks or funds in my portfolio to survive, if necessary.
Exactly. A dividend would be perfect for people who have to decide whether or not to sell the stock and invest for income. And the beauty of it is an Apple dividend will cause the stock to trade at a higher multiple not a lower one. And a reasonable dividend would not affect Apples strategy for the future one iota. How much money do they have to have in order to give some back to the shareholders? How about $200,000,000,000 will that be enough?
You could sell covered calls that are far out of the money. This way you can keep your shares and pickup four or five percent return each year. Same or better than a dividend. If you don’t want to do this yourself you can probably find a broker to do this for you.
The March $570 calls are selling for just under a dollar. That is about a 0.2% gain. Not much but if you do that every month it is a yearly gain of 2.4% which is about what you would get from a dividend if you are lucky.
If you’d have done the equivalent last month you’d have had to sell. Selling calls is a phantom profit. Assuming the price is the “fair” price (about the actual odds of it happening), or at least close to it, then all you’re really doing is paying brokerage fees and losing out on the spread, because sooner or later (like last month) the price blows through your call.
You can argue something like “well, if that happens I made a lot of money on the stock,” but you would have made that anyway, plus more, because you didn’t have to deliver on the call.
So it feels like a profitable thing to do, but it simply reshapes your return to one of a series of small wins interrupted by the occasional big loss. It’s a bit like a Martingale in that way. And in the mean time the spread each month is killing you by tiny cuts.
But you can aways count on the major players who sell the options to dump shares and drive the price down right before options expiration. Which is exactly what happened on the Wednesday before Februarys options expiration. The stock shot up to $526 and then like someone flipped a switch it dropped down to $490 in a few hours. AAPL is one of the best stocks to play the “max pain” theory with.
I have to agree. Let the business run the business.
Wall St. loves volatility. That is how they make their money. That is why we see all of these “analyst” predictions trying to create some volatility to exploit. If a stock is steady, and their is no easy way to manipulate it, then you chase away a lot of the Wall St. con men.
We will see what happens with this, and if the stock starts fluctuating wildly because of speculation then it is a sign they should forget about dividends. and publicly state so.
A dividend would not create volatility it would have a stabilizing effect.
I had been opposed to dividends for a long time too. But we’ve gotten to the point now where dividends would enormously benefit every shareholder and the possibility that they could cramp apple’s opportunities is already down to zero.
Hear me out. Assume apple introduced a regular dividend of 2 to 4% of the pps.
– They will be bringing in 40 to 50 billion (or more) in cash this year and that number will be increasing going forward.
– Such a number combined with such a dividend would still see their cash hoard continue to increase well beyond the hundred billion mark.
– That means no reduction in their ability invest hugely in supplier production, and no reduction in their ability to invest in any conceivably reasonable acquisition.
– The big benefit here is that this would bring in a huge amount of institutional buyers: There’s enormous money in income funds and these institutions can’t currently buy apple because of the lack of dividend. Imagine doubling the number of buyers of apple shares and what that would do to the pps.
– No other action by apple’s management could do anywhere near as much to increase that price per share.
– That’s why cook indicated that they’ll do it, and they will. The sooner the better.
Pete
Great post. The writer of this article is a meat whistle.
But you DO NOT want to attract just anyone. This is where volatility and manipulation come from. You want the big players, the vocal Wall ST. insiders to shun it. The less appealing it is to the volatility con men the better. That is why Wall St. is such a mess. Who but the big time players with manipulation power want to play Wall St. anymore?
The ones who will buy AAPL for the dividend would be those investing for dividends, i.e., the long-time holders. They’ll soak up a significant supply of the float or shares outstanding, causing a lasting upward pressure on the stock. Volatility of the stock will in fact be less with a dividend.
They need to be careful with the dividend, however. It should be large, at most 2% (~$10B/year). Also, I think a one-time dividend would not make sense. Microsoft did this a number of years ago, giving about a 10% one-time dividend. I don’t think it helped shareholders.
Exactly! I’ve been a buy and hold investor in Apple for 10 years now. The bulk of my stock was bought for about $7.50 (split adjusted). It’s time I took some profits, but I do NOT want to sell off my investment piece by piece to do it. Apple has twice the cash it needs to do anything it wants to do. It could buy Disney (ABC, ESPN, Pixar, Touchstone, Buena Vista, etc.) and Sprint, and still have $50B in the bank.
No, it’s the late comers, the speculators, the manipulators who don’t want a dividend. A dividend would attract more by-and-hold investors, and it would kill volatility. I don’t want to miss out on the next double in value for Apple, but I’d like some income from Apple before I die.
No it’s not just the late comers and speculators that oppose the dividend…You just want to eat the cake and have it too. Read what Apple Turnover has to say, if you want income let rise and sell some as your own dividend at whatever makes your day
Two words: Warren Buffett.
Your homework assignment is to read his thoughts on dividends and stock splits. Buffett is very much against dividends, and he demonstrates why this never hurt Berkshire, which does not pay one. Yes, Berkshire did split its Class-B shares (disclaimer: I own some Baby B’s) once, but for a specific and unusual reason.
I will say it again:
1. Wall $treet wants a dividend because its institution would make billions for doing nothing. You, the little guy, would get the equivalent if a Happy Meal.
2. Mutual Funds want Apple to pay a dividend so that the company’s stock could qualify to be purchased by them. That would likely goose the value of the funds and cover up the fact that most (uf not all) fund managers are incompetent morons.
3. Splitting a stock does not make it cheaper or more valuable. You only have more pieces of paper. But splitting a stock does make it more volatile and thus can be more easily manipulated by hedge funds and institutional traders for their personal gain.
Any questions?
I expect your homework assignments on my desk on Monday morning. Have a nice weekend.
I’m handing my assignment in now, mainly because it’s got my name on it & nothing much else besides. I expect to get a passing grade because there’s nothing more to say about the dividend issues, so I won’t.
Buffet’s core strength is that of a great investor. Every dollar he might have returned to shareholders via a dividend was better spent as an investment using his great skills.
Apple on the other hand does NOT have that core investing skill outside of their basic business.
What would the return be on the future incremental cash (to be held by apple) that would otherwise go to a 4% dividend. Apple has incredible strength in their core business, but Cook has already said that such incremental money will NOT go to running their business, as he said they already have all they need to run their business. (which no doubt DOES include strategic manufacturing investment)
Thus we’re left with them investing that remainder outside of their core business. That has clearly NOT been a great strength of theirs. Remember the benefit of the dividend is not JUST that money in our pocket. It’s the potential doubling of apple BUYERs by bringing income funds to the table, and the huge corresponding growth in apple’s pps.
What?!!
“Apple on the other hand does NOT have that core investing skill outside of their basic business.”
Lets see, Apple just the lowly computer maker.
They decide to go out of their core business and make this thing called an iPod.
Then they really decide to step way out of their core business and make this other device sometimes called a cell phone.
Then the tablet or iPad. That I’ll give ya, it just another computer.
Right.
Oh, forgot about the other side business called iTunes. Music store.
I’m not sure where I’d put the retail stores. Is that a core business?
I believe the small acquisitions they do make are spot on and well thought out.
Do you want them to spend money like MicroSoft?
Good god they are the poster child of what NOT TO DO with money.
Last time I checked Apple was kicking ass with all products without outside know-it-alls telling them what to do.
I see this all the time even at a personal level.
“People love to tell you how to spend your own money.”
I tell them to go to hell, work hard and make their own.
I agree with everything you’ve said, and I’m the guy you’ve quoted.
Apple has done, and will likely continue to do an amazing job of creatively expanding their businesses and creating products and services in new areas. You are absolutely right. You are also right when you say that they should continue to do so prudently.
It just so happens that when they do so prudently they find that they continue take in more cash than they can prudently INVEST in new businesses. It is that EXCESS cash which has been getting an ROI at money market rates. Those excess profits continue to ADD to the cash hoard, and are not being invested in businesses related to their own.
It is the investment of this excess (which, again, is NOT going to their businesses) to which I was referring to in my earlier post, and which I feel is not well spent. That excess profit will continue adding to the cash hoard, in ever increasing amounts, and receiving only money market returns, UNLESS they start returning some of it.
I have no desire to see apple reduce its investment in supply manufacturing, or other business related activities or expansions, and I hope and believe they WILL continue to expand in such areas. I am talking ONLY about returning such portions of their future earnings that would otherwise merely increase their cash hoard.
Pete
I bought APPL at13.89. I have followed it like a hawk. I can honestly say that Rocco Pandola is the first analyst who has made a bit of sense. Investors, enjoy the ride! Analysts, who know what AAPL should do to be successful, STFU!!!!!!! (Not you, Rocco)
Here’s what will happen if it is a one time dividend.
IF (very big IF) they announce a one time dividend and say the rules are
You get a one time dividend if you own stock the day *before* the announcement and continue to own it up through the payout you get stock
Then the stock will very, very, very slowly go up until the payout. The day of, or the day after at the latest, the payout the stock will drop *significantly*. Why?
1. People got paid and are moving on to other stocks
2. The perceived net value of Apple will be less because it has much less cash on hand
If Apple announces quarterly dividends the stock will initially go up then stagnate. Why?
1. Institutional buyers who are required by their charters to only own stocks that give dividends are not buying Apple now, but will once it starts giving regular dividends thus initially driving the stock up.
2. It will stagnate because
a. those same institutional buyers don’t trade. They hold.
b. people will buy and HOLD Apple stock for the dividend
c. the perception will no longer be “Where is Apple going that grows the company?” but rather “How can Apple run its *business* better to get the best quarterly dividend?”
The best thing that Apple can do with its cash is
1. to keep doing very, very narrow, very, very targeted acquisitions AND
2.buying unlimited rights to use critical intellectual property (buy rights to patents, copyrights, trademarks, etc. BEFORE they become popular or widely known). AND
3. use that huge checkbook to make huge advance payments for critical hardware (e.g., if Apple ever wanted to do a 4K display they could buy 100% of the first 12 months production run of the best display out there — and pay for it up front__OR__ they could buy 100% of the first 12 months of a certain SSD implementation)
Giving dividends — as long as Apple is still innovating and growing is just a dumb move any way you look at it.
Yes.
+ 1 million
I cannot agree. I really don’t want apple using tens of billions of dollars to purchase components in advance. That’s just bad business unless you are very very sure of how much of those components you will need. As their markets mature, the need to advance buy wanes, because the suppliers have caught up to demand, and you want the suppliers holding the risk of economic volatility, not Apple’s cash being subject to such risk and volatility! The majority of the amount of cash that is beyond their foreseeable need should be returned to shareholders.
There is always the debt market to help out if a large acquisition comes along that Apple needs to make. I’m not advocating debt, but on the other hand, unknown acquisitions just doesn’t seem to be around basis to sit on tens of billions of dollars.
A small dividend would be ok. I do not want to sell my Apple stock slice by slice to get some money out of it because I see myself more as an investor rather than a trader. Compare it with a building you own. You don’t mind if the value increases over the years but you would want the rent anyway.
ALL financial wizard analysts are morons….. They DO NOT GIVE A CRAP about helping / enriching anyone but themselves. They want their grubby little hands on Apple’s cash – drain it dry into their private accounts – and walk away saying there wasn’t enough…. If Tim and the Apple folks are wise, they’ll figure a way to jam these analysts into a lump in a corner and walk away while they bleed…
I bought about ten shares of AAPL over a two year period, ending with the last two shares during the last crash, when I got them for less than $90. Average price of all ten approx equal to $110. Current value over 500% increase.
Not selling anytime soon.
So true that its funny to see.
“Yet, we have geniuses lining up for days acting as if they know what Apple should do next. Trust me, you’re better off sticking to telling Reed Hastings what to do at Netflix.”
The problem is that the cash hoard is too large and there is minimal visibility into what this cash is invested in. The bulk of the assets are NOT in cash and cash equivalents. It is in long term investments, about half in “corporate securities”. Thus, a bulk of the “cash” is subject to interest rate risks, default, or other reduction of market value. I have full faith in Apple as a technology company, but a lot less faith in Apple as an asset manager.
What happens if a significant portion of the cash hoard evaporates due to financial market or interest rate risks? I do not want to start seeing one-time charges for investment losses. When the hoard becomes too large, these could start to bite into operating profits. Better to offload those risks and focus on products, instead of managing a massive investment portfolio.
That is the big unknown about Apple. I am surprised that there is no visibility in this pot. If it is anything but short term US treasuries, it is at risk. Currency risk, interest rate risk, black swan event risk. Yet no one asked about it a shareholder meeting. Analysts don,t seem to address it. Most of it appears to be “off shore”. I believe this unknown may contribute to undervaluation of shares. Would like to hear from anyone with insights.
Great article about offshore cash holding and tax risk to bring it back to the states.
http://www.macrumors.com/2011/10/18/tim-cook-not-religious-about-holding-cash-66-of-apples-81b-in-cash-is-held-overseas/
Finally, someone that makes an intelligent point about AAPL as an asset manager, although there is a certain amount of disclosure. But even more important than the lack of opacity is the DILUTION OF RETURNS FOR ALL OF ITS INVESTORS BY HOLDING SUCH LARGE AMOUNTS IN CASH. Consider the $138B balance sheet i.e. the assets that produce the earnings, of which $10B is cash and equivalents and $87B is marketable securities. The cash portion–7% of the entire balance sheet–earns less than a basis point. Marketable securities (63% of the B/S) are invested in US treasuries and agencies ($35B earning 2-3 bps return), CDs and time deposits ($4B earning 8 bps) and corporates and municipals ($44.5B earning under 4%). So on a weighted basis the 70% of the balance sheet that is in cash and securities earns under 3%, and the company generates $17.5B of additional cash (i.e. dilution every quarter). Those of us that want something done with the cash are actual intelligent investors looking for a reasonable return on the balance sheet.
Theoretically, a stock’s price should reflect its value. If that is the case then why even bother with dividends or stock buybacks or splits. You blow out money for dividends or buybacks and decrease the price of the stock. But I guess the market values things however it wants. Just seems to me that no real change of value occurs just manipulating things this way and that.
“In theory, theory and practice are the same. In practice. they’re not!
This is such a con job. You’ve got all kinds of people claiming its the institutional investors who want the dividend so they can manipulate the stock easier. It is the average investor who benefits from a dividend. The people manipulating the stock and making a fortune on the swings don’t want a dividend. Every time they knocked the stock down ordinary investors would scoop it up. A dividend would put an end to the manipulation.
None of the above had anything to do with Apple, nor should it. Let the rats play in the sewer. Apple has better things to do than play the usual dopey biznizz games.
Bad Biznizz is the default in the current era.
I do not understand why Apple shareholders, especially the ones who actually go to the bloody shareholder meeting every year, want to turn this company into every other inferior company on Earth.
Darn! Apple does things right. You’ll just have to suffer the consequences. 😉