If Steve Jobs were alive he’d do another buyback instead of upping dividend

“Why do people love dividends? Because they don’t understand either corporate finance or taxes,” William Baldwin writes for Forbes.

“Corporations disburse profits to their owners two ways: by paying dividends and by buying in their own shares. Except for the little matter of income taxes, which we will get to in a minute, the two kinds of payout are identical in their effects. And yet lots of otherwise intelligent investors are utterly persuaded that they are better off with dividends than with share buybacks,” Baldwin writes. “How else do we explain the $38 billion that has rushed into the three largest dividend ETFs (tickers VIG, DVY and SDY)? Why else would people buy a clunky defense stock like Lockheed Martin (yield, 5%)?

Baldwin writes, “Why else would Apple investors go atwitter over the prospect of a dividend increase? If Steve Jobs were alive he’d do a buyback instead.”

Read more in the full article here.

16 Comments

  1. Boosting dividend is not a good idea than buying back stocks. Tim
    Cook should have known better. Or it seems Apple insiders like him
    and executives, including board members who holds lot of stocks
    want to milk Apple cash dry. Imagine how much extra money they’ll
    get with boosting dividend. They seems to have same mentality as Wall Street crooks- easy money.
    Buying back stocks is more better for shareholders, in the long run
    stock price goes up and more valuable with fewer outstanding shares. While more dividends just drives value down for pps.

    1. That has got to be the dumbest statement that I have ever read. Boosting the dividend is a direct, reliable payment into MY, the long-term shareholder’s pocket.

      Stock buybacks serve may boost the share price in the short-term, but in many examples notably Cisco, they just lead to wasted cash. In the past dozen years, a period punctuated by annual buybacks, Cisco’s market capitalization has dropped by 80%. The cost of those buybacks over that period is approximately the same as Cisco’s current market cap. Buybacks are cash in the hands of former shareholders, something the market readily provides without a buyback program.

      The only people who like buybacks are hedge funds, day traders, other market leeches, and pure idiots who cannot plan more than a day ahead

  2. This guy should be fired immediately. What did he study in college? Creative writing?

    First off, nobody knows what Steve would do. He had a uniquely genius mind for business.

    Secondly, paying dividends and buying back stock are in no way identical. Paying a dividend is a direct, reliable payment to stockholders. The effects of a stock buyback, on the other hand, is completely subject to our irrational stock market. Considering how Wall Street–and idiots like William Baldwin–treat Apple, a buyback could just as easily cause a drop in AAPL price as it could cause an increase.

    1. Hilarious… I just looked at William Baldwin’s bio: “I graduated from Harvard in 1973 with a degree in linguistics and applied math.”

      Linguistics!

      Forbes should consider economic backgrounds before hiring people to write about economic issues. This guy has no effing clue about the job he’s paid to do.

      I’m not necessarily arguing for dividends, just against this pathetic excuse for journalism.

      I do kind of like dividends, however, in the case of a company that is making more cash than any company in history…

    2. Whatever fanboy reflexively click a one-star, why don’t you actually make a comment? Engage the conversation. Just because Steve hadn’t issued any dividends before his death, that does not make them inherently bad. Nobody knows what Steve would have done with $137B in the bank.

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