“Apple by way of its success has accumulated a massive pile of cash (and cash equivalents for you nitpickers) which is largely held overseas. To bring this money abroad the company must either pay a hefty 35% in taxes or hope for a tax holiday,” Marc Gilbert writes for Seeking Alpha.
“As it seems, Apple has decided to buckle down and wait. With more cash than is feasibly expendable on R&D or acquisitions, the company has elected (as is appropriate) to pay this money to loyal shareholders via dividends and share repurchases,” Gilbert writes. “On April 23, 2013, Apple increased its annual dividend by 15% from $2.65 to $3.05 per share. That day, Apple shares closed at $406. Since then, the company has paid out nearly $8.4 billion in cash to shareholders. In the interim, share prices have risen by over 25% as the company continues to support the price by buying back its own stock. The company has also been actively repurchasing shares which in turn causes the share price to rise.”
“There are two reasons why I hope that Apple does not raise the dividend this quarter as it has in the past. Firstly, I own shares in Apple because I believe that shares are undervalued. If you are investing under the same premise as me, the best method of capital return is via share repurchases where equity return is greater than the dividend,” Gilbert writes. “Secondly, while management can allocate repurchases at will, cutting a dividend is an enormous vote of no-confidence. For a tech company such as Apple, a protracted economic downturn may erode cash flows and I would not fancy the slaughter to ensue should the dividend be cut.”
Read more in the full article here.
[Thanks to MacDailyNews Reader “Fred Mertz” for the heads up.]
Apple:
There IS NO CASE AGAINST a dividend increase. Thank you
There is also no case for a dividend decrease either. The writer needed his 500 words in order to get a pay check.
The fact that you stated this in all caps indicates how really ignorant you are. I make a lot money and do not like having dividends show up when I have no need for the funds. It is not just the paying taxes on them but the increase in AGI which drives up my Medicare Part B cost and Obamacare surcharges.
I’ve never really understood why people feel the need to disparage others by calling them names. Stupid, Idiot, and Ignorant come to mind. If one doesn’t agree with a statement just present the facts for your case and leave the name calling out of it.
This is not a case of calling someone a name. Just stating facts. The definition of ignorant is “lacking knowledge or awareness in general”.
And so the world should revolve around you? A good part of my dividends come from shares held in a Roth IRA. Thus, for me there is no taxable component to that money. And if you truly are on Medicare you have no problem with Obamacare expenses. You don’t have private insurance, unless you are on a Medicare supplement plan, which typically runs less than $100 per month. In short, you’re arguing that very small increases in expenses matter for an individual who receives substantial income from dividends.
Another example. Clueless!!
Actually, Al, it is YOU who seem clueless (and just a little unbalanced, IMHO). Tell us, one and all, how many shares of AAPL do YOU own at this moment? Disclosure: Over the past 25 years, my wife and I have accumulated almost 6000 shares, and as recent retirees, this dividend income has done a great deal to offset the decline in our earning power. All things being equal, I seriously believe that Apple should at least match MSFT in its dividend offering: that is, at least 2.8%, which means $3.50 per quarter, or $14 per year.
As for Craig C’s observations below, #1 just ain’t gonna happen, not now, not ever. The Feds will NEVER allow Apple to acquire any company in its sector having a significant financial or technological footprint. No way. This money is rotting (primarily overseas, sadly), and only share buybacks and dividend increases offer any possible diminution of the pile.
Sure there is. Just off the top of my head:
1) Apple is planning some major acquisitions and needs the cash.
2) Apple is going to build their own factories to make all products in-house
3) Apple is planning to make a huge charity donation
4) Apple is planning to mail a really, really big check to Craig C
5) Apple foresees some bad economic times coming and wants to make sure they’re covered.
There are others, but #4 is the only one that matters. 🙂
Seriously…as silverhawk1 says below, there’s also no valid case FOR a dividend increase. Quite simply, it’s Apple’s money and they can do what they wish.
Granted, as stockholders (I’m one since 2003), we of course have some say in the matter, via annual meeting votes, etc. But if the proposal gets voted down, the company is under NO OBLIGATION to do it.
Still not happy? Either sell your stock or STFU. There are plenty of other investment options out there and I’m sure you can find one that will offer a bigger dividend than Apple.
Apple did in fact eliminate the dividend payable Dec. 15, 1995, at which time it was $0.12 per share; for a complete history, including stock splits: http://investor.apple.com/dividends.cfm
Given the reclassification of Apple as a more or less stable company with massive growth rates not expected the stock price has suffered in comparison to GOOG and AMZN for example. At this point, an increase to provide something like a 3% return would boost the stock, and on the other side of the coin if it doesn’t happen, the stock price will suffer. One reason would be that failure to increase the dividend would be seen as an indication of an apparent lack of management’s confidence in the financial future of the company.
One of the best policies Steve Jobs ever had was to completely ignore the stock price.
Focus on the business and the stock price/market value will take care of themselves. I’m still pretty happy with him as CEO thus far, but this is one lesson I wish Tim Cook had learned better. He should have never even dignified Carl Icahn with a meeting.
As a stockholder, sure I’d love a bigger dividend, but from a corporate perspective, they may have better uses for the cash. I simply don’t know and trust in their judgement…they’ve done quite well by me so far.
By engaging with Icahn, yet not folding, he proved himself a snake charmer, dissipating the threat in a way that previous prey were unable to manage.
Apple will do what it thinks best for the company and shareholders in general.
For some shareholders dividends create tax issues. For others like myself it does not and represents a way for me to grow my holdings by reinvestment.
The stock price fluctuates wildly for Apple. Dividends offer a physical return on the investment. I, for one, would welcome an increase in dividend but only if it does not put a strain on the company’s finances and they do not have to borrow money to maintain it.
Here’s another example. I examined the returns in my current 401K for the last 10 years. At least 20% of the current value is due to dividend reinvestment and is a good hedge against the volatility of the market and has grown the size of my investments.
Well said. Dividend stability, whatever that rate needs to be, ends up being beneficial to shareholders.
As crazy as this will sound, a stock split would actually push the stock values higher. Mainly because the perception would be that SOME would now be able to afford it. As a shareholder myself, My main frustration with Tim Cook is his timing. He needs to understand the timing of product announcements, releases and inventory to meet demand and stop with the LONG back-orders. A sell-out is nice.. a 90 days window to meet demand is foolish. (iMac, iPhone5, MacPro) IF he can align his timing better, the financials, sales and perception will improve.
I’m not so sure about a stock split. Google just did that and it didn’t seem to help the stock at all.