“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.
Welcome, AAPL shareholders!
You’re all Republican now. 🙂
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.
Dude. Seriously?
Definitely “Chimpy/Dubya/Shrub”.
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.
Argumentum ad hominem.
The first recourse of the empty argument.
@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.
Fsck you idiots and your incessant whining about taxes. It’s tiring to hear about and it’s miserable policy.
Happy to pay my fair share.
+1
That’s easy to say when you make fsck all.
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.
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.
Move to a better part of town. It sounds like you can afford it.
Yeah… You are right…. Society changes according to town.
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.
You bloody lucky bastard! 😄😄
Handsome money you made there…
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.
Share price in 2003 hovered between approx 14 and 23
And then in 2005 it split 2:1. $14.98 = $7.49 when split adjusted.
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.
“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.
Wish my income was enough to pay taxes
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.
44.6% percent? Care more for illegal aliens? You are a paranoid freak with a wild imagination.
“Wild imagination”? You haven’t been to California or Texas lately, have you?
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.
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.
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.
yeah, but at least we have decent food, very decent wine and a culture that goes back 100’s of years.
So I may be poor in my wallet, but I can get drunk on great wines.
As if my wine cellar isn’t full of them in addition to wonderful Napa, Walla Walla, and Hudson Valley vintages.
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.
“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
-1 for those that love paying for “their fair share” and implying the rest of us are bad for criticizing that notion.
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.”
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.
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.
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.
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.
ABSOLUTELY RIGHT. We do not need dividends. I do not want any dividend. I own APPLE as a growth stock and hold them long. I don’t want this exposure.
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.
If you’re paying taxes, you’re making money. Quit the whining.
+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.
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.
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.
Why do you need submarines and fighter planes to rescue people from pirates and perform humanitarian aid around the world after disasters?
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?
And they make a lot of money selling those same weapons to the “Bad Guys”
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.
“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.
Good one! And he was a Liberal too 🙂
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.
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.
AAPL shareholder here. Dividends are a bad idea. AAPL is a growth stock, and growth stocks keep their cash.
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.
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.
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.
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?
Baldwin writes. “Moral: Own Apple in your 401(k) or IRA.”
Really? SO when you take IRA distributions and pay ordinary income taxes to get access to the Apple profits from shares you bought in the IRA, that makes more sense than owning in your personal account and paying long term cap gain taxes?
Also please remember Buffet doesn’t like dividends because he believes he can allocate that capital much more efficiently and profitably than his shareholders. What is Apple doing with the excess cash above and beyond all they need for everything they want to pursue? Note that recently Buffet initiated a Berkshire stock buyback because he views the stock as being cheap.
To say Jobs wouldn’t have paid a dividend right now is in no way provable – his stance was formed on the near death experiences of Apple which is an extremely hard argument to make these days.
50% of my AAPL holdings are in my ROTH.
That’s absolutely the best place to put it, no doubt. That’s not what the author said though. (Also, Roths tend to smaller entities, so it is hard to own Apple in scale, unless one has converted and paid the taxes upfront)
Hey MDN – How about running some articles with an opposing viewpoint for balance, eh? Apple’s ‘Boring’ Cash Plans Remind Us That Tim Cook Is Sane
(Not that you’re necessarily worried about “balance” here, but it was worth a try.) 😉
Comparing AAPL and BRK makes no sense. One is a manufacturer and the other is a holding company that owns manufacturers. Holding companies need to amass cash to buy businesses, and the bigger you get the bigger the purchases have to be to make a difference.
Buffet isn’t against dividends. He said if he couldn’t use the money to create better returns than your bank would pay, he would pay it back. He believes he can make better returns, so keeps the money and his track record supports that.
A manufacturer that generates more cash than it can use to improve the business is bound to come under pressure from its owners, as it is their cash.
Saratosa’s point about the options is important. Not only Jobs’ family options but large grants to staff as well should not dilute our holdings. The buy-back plan in effect pays for the options from cash.
The ‘tax-efficinency’ argument is pretty thin. It’s like arguing we shouldn’t get paid salaries because the money comes from taxed profits.
‘efficiency’ – clumsy fingers
I’ve never heard of a company going out of business with $100,000,000,000 in the bank.
How does a dividend improve end user experience anyway?
BRK doesn’t pay dividends but they COLLECT dividends and use these funds to buy more companies that they can take cash out of to fund more purchases. If you don’t pay dividends or otherwise supply cash to BRK he doesn’t buy. So, I’m not really sure that it is correct to say that Buffet doesn’t like dividends. He believes that he can spend it better than you.
To say that Mr. Jobs would never support a dividend seems like predicting a future that can’t happen and who knows what would have happened. He also believed in growing internally without large purchases. When a company with $0 debt has $100b sitting on the sidelines, what do you want him to do?
This is dividend that is less than 2%, so it is a little less than most SP company dividends. But for most SP companies they pay out 40 to 60% of earnings. The yahoo quote expects $35 in earnings, so a $10 dividend is about 28% of earnings.
Note that this still leaves $25 / share to add to the cash bucket or covering other expenses. The big worry about loosing growth stock status seems pretty bogus to me. Growing profits makes a growth company paying a dividend doesn’t change that!
Lastly, I worked for NWA when they had basically $0 debt and significant holdings and were willing to pay cash for $100m airplanes. They were bought out by a group of investors who basically used the NWA assets to buy it. They put very little cash up front, then sold off all assets with lease backs, etc. and walked away with big money followed by once again going public to generate more money for themselves. Perhaps you don’t remember the name because they were bought by Delta after going bankrupt.
$0 debt and a large cash pile is nice to a point and then it can become a liability.
These are smart moves. Paying dividends and buying back shares when you have the highest market cap will deflect some measure of criticism in the post-Jobs era. Allowing Ms. Daisey to drive her lumpy self into the ditch is another example of Apple 3.0 (I thought Apple’s public restraint was brilliant).
— “Growth stocks don’t give dividends” is a RULE dividend haters spout … BUT isn’t Apple a rule BREAKER?
— If you work out the numbers (with amount of cash that’s coming in) even paying the dividend their cash pile will continue to grow so it doesn’t hurt their warchest.
— some people say they don’t want dividends but GROWTH.
Cook is saying you can have both BOTH.
Also how is growth going to come without new infusions of investors? (stocks go up if new buyers plunk down $$$) and Apple is a giant marketcap which needs a lot of $$$ to make it move up. With dividends appl widens it’s market to hundreds of dividend mutual, pension etc. funds.
reports have already been made that many non dividend funds have already exhausted their legal ability to buy more appl stock. I believe that big funds wanting to buy appl for their dividend portfolios was a big driver for the dividends.
Most appl is held by big funds not small investors.
— by broadening their base to income funds it will help STABILIZE the wild fluctuations of aapl and make it harder for manipulators.
— dividends is great as it gives cash without need to SELL the stock. People selling stock is not good for share price.
— we can’t predict what Steve Jobs would have done NOW. He never saw 100 billion in cash.
“Dont ask how Steve would do it” and “Think Different”
I know nothing about finance- stocks, dividends, etc. However, anything a republican says I assume to be nonsense.
You don’t need a weatherman to know which way the wind blows.
…it was pretty dumb of Steve Jobs not to initiate the shares buyback when they were amassing huge amounts of money and the stock was undervalued. Freaking Buffett was advising him to do it. And they will be buying it back now for $600 per share?
Steve Jobs was a great CEO. But let’s be honest, he cared about the company and not the shareholders. Apple is a publicly traded company and has obligations to the shareholders. Tim Cook obviously is aware of this and much more willing to appease them without sacrificing Apple’s goals as a company. I think Apple’s performance since Cook took over are partly due to the ridiculous earnings numbers, but also partly due to Cook’s shareholder friendliness. Nothing wrong with having both.
$45 billion over three years is chump change for Apple – stop your whining. It can’t really measured but I’m quite sure that share price appreciation due to this decision will far exceed that.
Seriously, if you hold the stock and don’t like The Board’s decisions, you can sell your stock or lead a movement to fire the Board members and put in your own Board of Directors.
Good luck with that second choice.
Oh BS on the Feds grabbing more power. They have been under the knife and have been deregulating for the last 15. You want blame? Blame our freaking Empire. Discretionary spending is not the issue. You people need to stop thinking it is. The issue is the elephant in the room, non-discretionary spending such as military, SS, medicare, etc.
And that’s just utter non-sense that “government” is incapable. You are making a farking stupid assumption that all government employees are apparently like you and are lazy and therefore don’t like to be efficient, productive members of the workforce. Tired of all you idiots that think you have a clue spout out such utter non-sense. Of course you would never have lazy people at “real” work would you? And a budget never gets cut at real jobs if the money in the previous year wasn’t spent, right? Get off your high horse and realize that there are idiots that make bad workplaces in both the public and private sector.
Yeah but a company can go out of business, lay off its employees and start again if they declare bankruptcy. No one is forcing you to pay Apple for their products. Try not paying your taxes; go to prison, wages and bank accounts garnished, lien put on you and this is if you can not pay your taxes due to an economic downturn. So before you start spewing and saying private and public sectors the same see how much you can avoid a corporation and try to avoid the government. About there being lazy fools yeah there are are on both sectors but one can be ignored and the other not. So watch when that high horse of yours bucks you!