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A new dividend policy for Apple

“Apple’s stock price has been moving up over the last weeks, due to an improving outlook for the second quarter and the rest of the year, as the new iPhone SE seems to be a hit and focus is increasingly shifting away from the iPhone 6s and towards the coming iPhone 7,” Jonathan Weber writes for Seeking Alpha.

“Apple has stated that the company would announce a new shareholder returns strategy in the near future,” Weber writes. “Apple produced free cash flows of $63 billion over the last year, and has a cash pile of $216 billion on its balance sheet (consisting of $178 billion in long-term investments and $38 billion in short-term investments and cash). Apple has paid out $37 billion to its shareholders in the form of stock buybacks and $12 billion in the form of dividends (for total shareholder returns of $49 billion).”

“We know that $200 billion of these $216 billion Apple has in cash are located overseas, which means that these cash amounts are not easily available for shareholder returns in the form of dividends or share repurchases (but could be used to make acquisitions, as long as the target is not headquartered in the US),” Weber writes. “Apple returns a lot of cash to its shareholders, mainly in the form of share repurchases, but this approach hasn’t been very successful in generating higher share prices, as Apple’s share price is down 10% over the last year. I thus believe a different approach could be viable: Increasing the dividend substantially, and at the same time repatriating Apple’s offshore cash to keep funding share repurchases for the near future.”

Read more in the full article here.

MacDailyNews Take: Forfeiting 40% of overseas cash for the U.S. government to blow — on such things as litigating against Apple in numerous cases and on third-parties to hack iPhones, for just a few examples — is not an intelligent use of Apple’s hard-earned money.

If Apple wants to increase dividends, they should simply issue more bonds. It’s free money.

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