“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.]