Smart Steve Jobs wouldn’t have paid a dividend

“Crafty bosses like Steve Jobs and Warren Buffett don’t let their companies declare dividends. That’s because these payouts get clobbered by taxes. At the moment the federal tax rate on dividends is 15%, but the rate is set to triple next year,” William Baldwin writes for Forbes. “The smart way for a corporation to pay out loose cash is with share buybacks. So the $10 billion buyback part of Apple’s announcement today is Jobs-smart. The $10 billion annual dividend, to begin this summer, is dumb.”

Baldwin writes, “Why is Apple initiating quarterly payouts? Because the mob wants it. Evidently the stock has been doing well in the past six months not just because iPhones are selling so well but because experts have been anticipating this big dividend announcement. But Steve Jobs was not one to let popular fashion, on Wall Street or elsewhere, tell him what to do.”

“For the 2012 tax year, the federal rate on most cash dividends is 15% and so is the rate on long-term capital gains,” Baldwin writes. “Next year the divergence between dividends and long-term gains is destined to get wider, absent any agreement between President Obama and Congress on extending the Bush tax cuts. Dividends will be taxed as ordinary income at rates up to 39.6%. The rate on long gains goes to 20%. Then there are surtaxes. Beginning next year, Obama’s 3.8% surtax on investment income kicks in for people with adjusted gross income over $250,000. There’s also a clawback on itemized deductions that effectively adds 1.2 percentage points to the tax bracket for most taxpayers.”

“All this adds up to a 44.6% maximum federal rate on dividends and a 25% rate on long-term gains,” Baldwin writes. “Moral: Own Apple in your 401(k) or IRA.”

Read more in the full article here.

79 Comments

    1. Bullshit!

      FYI-
      1-Dividends are taxed at a rate lower than income- ask an accountant or tax lawyer.
      2-Taxes will be going up to pay for the Rethugnican spending spree & tax cuts under the Rethugnican CONgress and Bush the Idiot (Chimpy/Dubya) from 2001-2006.

        1. Just more liberal elitist garbage. I really not huge fan of either political party but I especially loathe the complete lack of civility I see from main stream liberals.

      1. @progressiveagentprovocateur: Please go back and re-read the article above. The tax rates cited are not opinions – they are facts. Still don’t believe it, research it yourself. Why you brought this up amazes me. I don’t say this because I am on any particular side of the political fence – facts are facts.

      1. No. I bought in at $7 ($14 before the split) in about 2003(?).

        So I consider myself both lucky and more than able to pay for the things that collectively make us richer. You know, schools, roads, national parks, etc.

        1. In 2003 I bought at $7.49. I don’t mind paying taxes at all. I’d pay more if it meant I didn’t have to live in a society characterized by homelessness, squalor, misery, poverty, and selfishness.

            1. I work in a high rise office in a major city. I have a view of snow capped mountains from my office. But I have to walk past the homeless asleep in doorways, and panhandlers on every street corner to get to work. It doesn’t have to be like this. We are a better society than this. But we’re told every day that selfishness and the denial of basic human needs is patriotic and good. Gated communities are not the answer.

            1. Not as much luck involved as one might think. Being a Unix geek, I understood the power that would be unleashed when Apple based OS X on BSD Unix. It made the iPod and every device spawned from the iPod possible. It made the Apple desktop/laptop OS bullet and virus proof. The only question was whether they would survive long enough to gain some momentum.

      2. I make a lot more than as you put it “fsck all” and am happy to support the country that made my way more than “fsck all” paycheck possible.

        I just wish they spent it more wisely.

        1. “I just wish they spent it more wisely.”

          And therein lies the problem. Federal government, under either party, has been grabbing more and more power and more and more “services” are becoming federal in nature, but the problem is the government is the least capable entity to run any program efficiently. They don’t have any incentive to do so, because they will be around next year. And if a government agency doesn’t spend all of the money it is allocated by being efficient, its budget is cut next year.

    1. If you think 44.6% is a “fair share,” move to failing Europe and leave the rest of us to live freely in the U.S. without being indentured servants to a confiscatory government that seems to provide more services for and care more for illegal aliens than for the actual legitimate citizens who bankroll the whole ball of progressive bullshit.

      1. Go find some Americans willing to do the low wage slave labor those “illegals” do, so you can have cheap carrots and complain about their healthcare costs.

        Maybe if they weren’t exposed to Monsanto’s POISONS day after day, they would have reduced healthcare costs.

        The opposite of progressive is regressive, that about sums up you reTHUGliCONS.

        1. I have plenty of people I know who would love to be able to work construction right now, but can’t because they can’t find the work or the employers hire illegal immigrant day laborers because they can pay them less (and not pay taxes on wages).

          The problem is not just the wages of the job, but that there are plenty of employers willing to violate the law to save a few dollars an hour.

          1. And the vast majority of those illegal employers are ‘guvmint’ bashing, talk show Conservatives who hang on every epithet slung by Limbaugh, Hannity, and Lars. So much for patriotic, God and Country, rugged ‘Murkan’ capitalists.

      2. 44.6% is not that much. In Quebec, Canada, the Federal, Provincial and Municipal taxes can top 60%.

        Most of the money goes to those people who don’t work. They choose to live off of the largess of the local governments, just like their ancestors did.

    2. “Happy to pay my fair share.” Be my guest. Just write a check to the “US Treasury” to cover what you consider your “fair share” beyond what you’re required to pay. Just don’t tell me why MY fair share is.

      And let’s not get caught up in the “Buffett Rule” nonsense. Buffett won’t be paying his “fair share”, any more than Bill Gates will. Most of their wealth goes straight into their charitable foundation and is NEVER TAXED.

  1. Can’t just let 100’s of Billions of dollars pile up in a savings account for a publicly held company. There’s no way to justify it.

    Yes, 100’s of Billions — that’s what they’ll have within three years either way.

    So give a little dividend, let a few pension plans get in on the stock, and meanwhile amass your 100’s of Billions in cash anyway.

    That’s definitely smart. Now you can say, “But we are giving $$ back to the shareholders… AND we’re amassing our war chest to buy Portugal and turn the entire country into a server farm.”

  2. The writer is right that these puny dividends are just to please the whining mob. This program will hardly tamper with Apple’s cashpile growth, which will be like $200 billion in two-three years.

  3. As I had written on other sites…

    I agree with this article.

    The idiots that like the dividends never explain what Apple gets out of it – just a bunch of happier investors. Apple’s stock is still skyrocketing, a very attractive investment that produces its own rewards, so there is no reason to give away the cash on hand. Dividends are merely bribes to investors to buy their company’s stagnant stock. It is much more typical of slow-growth companies.

    Steve Jobs was a very savvy businessman, breaking many firmly held business myths. Now, this new move is based on a bunch of old-school directors playing it safe, unwilling to “Think Different”. Without recent innovative ideas and products, this move brings a huge shift in Apple’s business focus; not too different when Balmer started to run Microsoft.

    Investors that love leading-edge companies will be selling their shares based on the fear of Apple’s own people believing there is nothing more.

    Putting business and finance leads at the top of a company, with the innovativeness of lobotomized lemmings, is the surest way to induce an company’s agonizing death.

    1. For all we know, a Jobs-led Apple would have made the same decision. Don’t be so quick to assume this change was made solely because Steve is no longer with us.

      1. Exactly. I can’t imagine that Steve and Tim and others never discussed this topic. We can only guess as to what Steve would have done. Maybe even Steve would be unclear on this. Fr some presentations it is said he arrived with two presentations and picked one at the last minute. Products that were about to be released were said to be left back stage at the last minute.

    2. Interesting that here is such a push back from people over this dividend. Let’s be very clear, Apple can continue to pursue innovation AND pay a dividend. Why can’t they do both?

      You ask what does Apple get out of a dividend? Perhaps the hundreds of mutual funds that can’t buy a stock unless it has a dividend are no eligible investors so it broadens the base – that has to be seen as a positive for Apple.

      And if you listened to the call, Tim Cook clearly stated they are intensively focused on pursuing innovation. How do you figure the finance guys are leading the company? Tim Cook is a supply chain guru, not a finance guy.

      Really interesting the average Joe can’t see how Apple can pursue innovation and pay a small dividend, and have tons of cash left over that accumulates on the balance sheet.

    1. Spoken like a true statist.

      There is a point where taxes become overbearing.

      I pay a tremendous amount of taxes and see very little positive results.

      I’d rather pay more to my local county and have it used to benefit my neighbors, with expenditures decided by us in the community, than to waste it all on an inept federal bureaucracy.

      1. And yet you’re willing to let the “inept federal bureaucracy” spend $1T each and every year on the military. You’re willing to trust that we need a bunch of $339M F-22 fighter planes and a few more $8.6B nuclear submarines so that we can defeat the goat herders in Afghanistan who have to hand deliver their homemade bombs. Yep, you’re a genius.

        1. You may disagree with some of the military’s spending and where they are sent, but the fact is that the world needs a military force which stands up against the bad guys of the world. Our military has rescued people from kidnappers and pirates, rescued Iranian fisherman, and performed significant aid in disaster zones like the tsunamis and earthquakes which have hit poorer areas of the world in the past few years.

          There will always be bad guys in the world, and there will always be a need for a powerful force to stand up to them. Things won’t always go as planned, but the U.S. military does far, far more good for the U.S. and the world than harm.

            1. Because sometimes, our enemies aren’t goat herders, and the military sometimes has to do other things than deliver aid. Or does the Russian and Chinese nuclear capability not exist in your world? Or the fact the Chinese are using their new-found wealth to stockpile ballistic missiles opposite Taiwan?

      2. So to summarize your point:

        “get off my lawn” & “You aain’t from round’ here are y’all”

        You are also completely full of it crap. You are that old codger that shows up at a county board meeting with nothing constructive to add, just nonsensical, never-ending complaints.

      3. “I pay a tremendous amount of taxes and see very little positive results.”

        Except that you live in a country where some kid can start a company in a garage and grow it into the most valuable company in the world in a (tragically, very short) lifetime.

        That’s what your taxes are paying for — America. The shared values and fertile infrastructure that lets something like that happen.

        1. -1 when did paying taxes to be wasted become “American”? Yeah ask the poor that are being helped by our tax dollars. Those programs are just for the bureaucrats and their pet projects. If some people get helped, fine but no biggie if no positive results appear, just go back and ask for more. Justify the budget increase.

  4. The dividend isn’t being paid to benefit ordinary shareholders but for the estate of Steve Jobs. The buyback is obviously to absorb all the options that his family will be exercising soon, too.

    1. Growth stocks don’t pay dividends because they want to invest free cash flow in their business to grow it. Not the case here. Apple can continue to invest in their growth, but generates such excess free cash flow, they can do both.

  5. Since Tim Cook and the Board can’t say this…I’ll say it for them. “Here, take your money and shut up!”
    Problem is, the greedy only get greedier now and there will be even more pressure later.

    Jobs would never do this, because he knew the same demanding shareholders would push Apple off a cliff on a moments notice…you don’t buy loyalty…you feed greed…it will never be enough.
    Sure, history says it is pretty normal to do this, but Apple has never been normal.

    1. For all we know, a Jobs-led Apple would have made the same decision.

      Don’t be so quick to assume this change was made solely because Steve is no longer with us.

      That being said, your comments on greed vs. loyalty are certainly something to consider. Especially with the entitlement mentality far too many Americans have nowadays.

      1. By “Entitlement mentality” are you referring to the Imperialist Foreign Policy championed by the right? The “entitled” to intervene in the affairs of what ever nation we decide? OR the “entitlement” corporations have to control our politicos and profit from crony enacted government policy? Perhaps how you are “entitled” to greatness because you are American? OR perhaps you are referring to the fact that you are entititled to keep your head and the sand and ignore science because you don’t like the implications of science and what affect it may have on your lifestyle?

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