Apple special dividend: Why AAPL shareholders are owed $30 per share by Christmas

“With a dividend tax hike looking more likely by the day, Costco, Las Vegas Sands, Dillards and a slew of other companies have already announced plans to give sizable one-time payouts to shareholders by the end of the year,” Jeff Macke writes for Yahoo Finance. “Now it’s time for Apple to join the party.”

“The current tax rate on dividend income is 15%. Set in the Bush-era, this rate is set to expire in January unless lawmakers intervene,” Macke explains. “Under President Obama’s proposed plan, dividends would be taxed inline with wages and salaries in 2013. That would mean dividend taxes will increase to as much as 39.6% for high-income earnings. With the kicker of a 3.8% additional tax on all investment income, the effective tax for dividends could be as high as 43.4% for anything paid out next year.”

“Faced with the choice of netting 85 cents or 55 cents on every dollar of dividend income, investors prefer the former. For the companies themselves, any cash on their balance sheets as of January 1 will be worth less than it was New Year’s Eve, as far as investors are concerned,” Macke writes. “Cash that is not needed for operations and is intended to be used for dividend payments in the future should be paid out in the next month. Those who claim otherwise are wrong.”

Macke writes, “Apple has $121 billion in cash on its balance sheet, give or take a few billion. With about 941 million shares outstanding, that works out to roughly $128 per share… If Apple took all the money earmarked to pay out dividends over the next three years and paid it out now, shareholders would get $31.88 per share. If taxed at the current 15% rate, that would leave investors with $27. If that same money is paid out after January 1, it would leave shareholders in the highest tax bracket with $18 after taxes… This has nothing to do with “fair” or the 1%. The money belongs to shareholders, and the option is either to take $27 in the next month or $18 spread out over the next 3 years. It’s not a trick question; the only rational choice is to take the money now.”

Read more in the full article here.

[Thanks to MacDailyNews Reader “Rainy Day” for the heads up.]

Related article:
Apple to distribute special dividend ahead of fiscal cliff? – November 28, 2012

66 Comments

  1. Am I missing something here?

    What benefit does this have for Apple in the long-term, or short-term for that matter?

    “Apple please give us money now so we can dump your stock New Year’s Eve …”.

      1. “there would be no advantage to anyone.”
        Are you a retard? For those of us who have Apple stock, we would get $30 per share at a 15% tax rate as opposed to a much higher rare latter.

    1. Seriously? Come on, if that is the case you have over 25000 shares (750K/30=25K shares).

      Why are you spending time reading blogs when you have over $14 million in stock and already receive over $132K in dividends this year already. You seriously want us to believe you have nothing better to do with your time is you have that kind of money?

      Ah, you poor bastard. You really need to get a life.

    1. You’ve recently dropped much more than $30 a share. I wouldn’t hold my breath. The moment Apple announced it the stock would jump by that amount, then the moment the qualifying kicked in the stock would plunge.

      $30 would eat up a very large chunk of Apple’s US cash. No way will they do that much. If anything, they’d be more inclined to stop paying dividends at all until the tax situation is favorable.

      Dividends feel like free money, but all they really do is accelerate your tax burden, as the company is subsequently that much less valuable. If you don’t plan to sell for a long time you’re better off not taking a dividend at all.

    1. That’s why the smart companies (like Costco) borrow money to pay the dividend. This will be paid bak from future cash flows. The interest is tax deductible expense.

      Of course, this only makes sense if you expect to keep generating free cash flow in the future.

      1. Yup. What a time to be borrowing money! Individuals or businesses, you pay almost no interest. We won’t see this again for decades that’s for certain. I remember paying more than 9% for a mortgage! It’s been a while of course. But don’t think that it won’t come back around someday. If you can and you know that you can pay it back, borrow money now. Also, what a great time to be buying a home or an investment property. There are still fantastic opportunities out there in real estate. Some areas of the country will take a long time to come back and some are coming back already. Las Vegas will take a long time. Burbank is already coming back. In five years people are going to look back at the great opportunities that were available from 2008 through 2012 in real estate. This can’t last forever.

        1. I don’t see interest rates rising, EVER. If rates go up the Feds wouldn’t be able to pay the interest on the debt with ALL current tax revenues. At current rates the annual interedt on the debt is almost $500 billion. if rates triple to 9% we’re al screwed. Think about it.

  2. I’ve been thinking about this a lot lately and have been debating selling by years end. If they were to do this I would change my mind and be happy with the $15K now and hold all my stocks until the retards in Washington pull their heads out.

  3. If there’s no cash at hand, there’s a much smaller chance to wield buying power of CPUs, memory, patents.

    Big dividends are a waste of stock price from the day after the dividend is released. HUGE thumbs down on dividends.

  4. Wow, talk about exaggeration. Yeah, maybe this is true for a tiny handful of people. For most people the tax will be a little higher, but not a huge amount. Also, as pointed out by Paul much of Apple’s cash is overseas and won’t be brought back for this purpose.

    Having said all that, it would be nice if Apple accelerated payment of some future dividends. It won’t be anywhere near $30.

  5. What’s best for shareholders is what’s best for the company, and as much as I would love getting a small fortune, I’m not sure it’s best for Apple. Besides, we don’t know just what is going to happen to dividend tax rates yet.

    1. Dividends are not “hard earned money.” The stock that earns the dividends may represent the fruits of hard earned money, but the dividends themselves just show you made a good choice of where to invest. That is why most of the country thinks it’s unfair that the super rich who earn most of their millions through capital gains and dividends. only pay a tax rate of 15% whereas the people who actually do work hard pay taxes at a much higher rate. Taxing dividends the same as hard earned money is a completely fair thing to do. And yes, I’m an Apple shareholder.

      1. By quoting the false 15% rate you are ignoring the huge corporate income tax rates. The real tax on Income from Dividends is that 15% plus the 35% corporate income tax which makes it around 50% rate.

        That said, being jealous of others wealth and success is very ugly. There is hardly any human trait that is more odious and disgusting than jealousy.

        1. The REAL corporate income tax rate is down around 14% for most companies and zero for many due to tax credits and fixes, etc.

          The statutory 35 rate is kind of like the 55 mph limit: it’s what people are supposed to do, but never do.

        2. The only person even suggesting jealousy is you, twimoon. But I would disagree with you that it is the most odious or disgusting human trait. Arrogance, disdain and lack of human compassion are at least as bad.
          And your argument of “stacking” different taxes is utterly wrong with regard to most investors. For small investors dividends are usually part of their 401k package and are a form of income. For most wealthy investors (such as Buffet, Romney) it’s their main form of income. Hence the disapproval (though not jealousy) that it’s taxed at such a low rate.
          The US economy was in much better shape before top tier income tax and capital gains tax rates were lowered to their current lowest-ever levels.

      2. “Taxing dividends the same as hard earned money is a completely fair thing to do.”

        No it’s not. Apple already paid tax on that money. And now you pay more tax. On top of that, some AAPL shareholders are dividend-paying companies themselves. Which means Apple pays tax on it, then that company pays tax on it, then those shareholders once again pay tax on it. In the end, taxing it like income basically means just go ahead and ship it all to the government.

        1. Oh, come on. There is nothing anywhere that says any particular dollar can only be taxed once. Money get taxed when it changes hands. Apple’s divdend becomes the shareholder’s income. It’s the same principle when Apple pays its employees. When it’s in Apple bank account, it’s Apple’s money. When it hits the empoyee’s bank account, it becomes that employee’s income. That’s how the system works. As explained above, why should someone get taxed less when they get their money for sitting on their ass than folks who sweat earning theirs? It is all income, regardless of where you get it. It is only classed diferently in the tax code to benefit the wealthy.

          1. Apple, like any company, gets a tax benefit when paying its employees. It’s not the same. You’ve distorted the discussion. Nobody said there should be no tax. Nobody said it should be taxed only once. It just shouldn’t be taxed as ordinary income. And it’s not only a problem for the rich “sitting on their asses.” It’s a problem for even small private companies where everybody’s working hard and nobody’s ass is collecting dust.

      3. You are full of Obama baloney. The upper 1% of the returns pay more tax revenue than the bottom 80%. The real problem in the country is the exaltation of takers instead of makers.

        1. Here’s the real problem:

          Goldman Sachs CEO Lloyd Blankfein came to Capitol Hill this week to call for cuts in Social Security, Medicare and Medicaid. As Congress and the White House are negotiating a year-end deficit deal, Blankfein blustered about the need to “lower people’s expectations” about their retirement and health care. He was loose with his facts. He spoke with all the sympathy for someone struggling to get by on a $14,000-a-year retirement that you’d expect from a Wall Street banker paid $16 million last year. To Congressman Bernie Sanders, Blankfein’s attack on working families is obscene. “Think about the arrogance of these guys on Wall Street who were bailed out by the middle class of this country when their greed and recklessness nearly destroyed the financial system, and now they come to Capitol Hill to lecture Congress and the American people about the need to cut programs for working families,” Bernie said. “This is what class warfare is all about.”

        2. The amount of revenue paid is less important than the percentage paid. If you lower the tax rate to where the rich pay the same amount of revenue as the middle class, the tax rate would be near zero for those wealthiest Americans. Fairness involves the rate at which income is taxed, not the total revenue. In other words, a fair share.

        3. Do they pay more tax *AS A PERCENTAGE*?

          BTW, I do NOT agree with the people who hate “the 1%”. I admire them, I would love to be one of them. But I do think that the tax system could be more fair to *everyone*. A flat tax or sales tax (so you could avoid tax by not buying stuff) would be good.

      1. Those without an argument always revert to name calling. If you think that someone’s “fair share” is a third of their income just to the Feds I would think that that makes you the Taliban. I think it’s up to each individual to decide what their “fair share” is.

Reader Feedback

This site uses Akismet to reduce spam. Learn how your comment data is processed.