Apple stock takes hit; company’s refusal to issue special dividend ahead of looming U.S. tax hikes to blame?

“The special dividend variable is quickly turning into a significant Wall Street anomaly that will have unintended consequences,” Jason Schwarz writes for Seeking Alpha. “Without a precedent it’s difficult to forecast exactly what will happen, but we’ve come up with three likely consequences.”

Consequence #1: Those companies who prepay 2013 dividends and beyond will become less attractive to income funds over the next year
Consequence #2: Any company that chooses not to participate in the special dividend will become more attractive to income funds in 2013
Consequence #3: In the short run, non special dividend participants will face selling pressure as institutional money managers re-allocate to maximize exposure to the anomaly

“Apple’s refusal to issue a special dividend is causing a third wave of its sell-off that began on September 21st,” Schwarz writes. The first wave was caused by institutional re-balancing due to Apple’s 74.9% YTD returns, the second wave was caused by the hangover effect of President Obama’s re-election and the third wave is being caused by special dividend posturing as funds sell Apple in order to gain exposure to the dividend bubble.”

Schwarz writes, “Apple’s rally window is coming, this dividend bubble will likely enhance Apple’s next rally, but we’ll need to endure another dip before it takes off.”

Read more in the full article here.

See also: Apple’s stock swoon blamed on increasing Apple’s margin requirements – December 5, 2012

Related articles:
Will Apple be next up to pay a special dividend ahead of expected U.S. tax hikes? – December 4, 2012
Analyst: Don’t expect special dividend from Apple Inc. ahead of Obama tax hikes – December 3, 2012
Apple special dividend: Why AAPL shareholders are owed $30 per share by Christmas – November 29, 2012
Apple to distribute special dividend ahead of fiscal cliff? – November 28, 2012


    1. The ONLY thing wrong with analysts is the financial ignorance of the common man. I used to be one, but since the 2008 meltdown I have worked to understand the long term trading strategies (and requirements) of institutions and funds. They are not sinister, the little investor isn’t even part of their discussions. When you come to grips with that, you’ll start looking for the real cause of AAPL’s trading vagaries.

  1. No, it isn’t “special dividends”. It is the idiots that only trade based on the charts. It looks like yesterday the SMA 50 and 200 crossed and this event will make everyone return their Apple devices and buy something else with their money. The charts will remove iPads, iPhones, iPods and Macs from every gift wish list on the planet. The charts will erase the $125 billion in the bank and close all those Apple Stores with the greatest sales per square foot turning them into local bagel and coffee shops.

    Yes, the charts will make all this happen.

    Clueless idiots! Try walking past your local Apple Store or looking around to see what people are really buying and using.

    1. I’m in far more agreement with this than I am with the post by Jax44. Charts are quick and dirty “analysis”. They are for the lazy.

      Try learning what the institutions are doing, and how to measure that instead. That’s far more accurate, but much harder.

        1. Oh, come off it. It’s an opinion. And yes, i know, your response was an opinion as well, but why submit it in the first place? Gregg has some interesting points worth reading. All you did was attack him personally rather than counter his arguments.

          @greggthurman: don’t let the personal attacks stop you. It just seems to be a way of life around here when people can’t come back with counter-arguments, they make personal attacks.

    2. I agree with you but would like to add that there is also the dreaded ‘head and shoulders’ pattern set up and Elliott Wave pattern of a 5 wave SELL (target $475). These things although meaningless when you look at the shoppers in the stores make traders uneasy and trigger the SELL movement. There is no way to convince these traders that they shouldn’t sell. The only way to combat this is to BUY. As a small time trader, you can take advantage of this movement buy going to you line of credit and BUYING as much as you can. Enjoy the profits.

  2. AAPL market sentiments had been hurt very bad for the last few
    months by Wall Street AS*HOL*, any little bad rumor/news would bring it down hard, guess it would take a while for bears to turn bulls

  3. I’m starting to wonder if the decision by Apple to cave in to demands of loudmouth analysts like Toni Sagnocci and Wall Street in general to begin paying a dividend is the root of Apple’s stock swoon. Here’s why:

    Sagnocci and those like him demanded a dividend because institutions holding millions of shares of Apple would immediately get Billions of income by doing nothing, just the way they like it. But the consequence of doing so was that once Apple began to issue a dividend, its stock could then be added to large mutual funds.

    Once that happened, the percentage of ownership by institutions swelled. And once that happened, the stock’s fate was more under the control of fund managers and less by rational fundamentals that would otherwise drive the stock. (See the related story about margin requirements impacting. Apple’s stock swoon today as evidence.)

    I like dividends, but I’m afraid that I am about to pay a heavy price for this. I’m moving what I can to my IRA and will likely liquidate or reduce my holdings of dividend paying stocks not protected under my IRA in anticipation of being punished by the fiscal cliff outcome. This will sadly impact Apple and other companies that pay a dividend.

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