Apple to pay dividend to shareholders: Worst decision in years

Discussion in 'Wall St. News' started by peilthetraveler, Mar 19, 2012.

  1. So with their $98 billion dollars they are going to give that money back to shareholders. Well congradulations Tim found a way to start making apple go down.

    Mark my words, this new leader of apple is going to tank the company if he keeps making decisions like that. Apple had $98 billion in cash. Do you know how many billions per year they were making just off the interest on that money? So they are basically just giving away cash. Because of this apple will reduce its balance sheet and income statement by billions.

    Worst decision ever.
  2. rmorse

    rmorse Sponsor

    What do you think they should have done with the money?
  3. LOL. I'm sure Mr Peil has plenty of experience running a $500 billion company...
  4. You are aware that large companies that pay dividends typically outperform ones that do not over long periods of time?

    Now stock buybacks by Tech companies are just a re-distribution of shareholder wealth to insiders as the stock is immediately handed out in large grants to executives after being acquired in the buyback.
  5. Seems like a pretty good way to get the big institutional investors (i.e: pensions, mutual funds, etc), to hold and sit.
    Apple can't be a growth stock forever and I'm sure they know that.
  6. Well its not a $500 billion dollar company anymore now that they are giving away $100 billion dollars of it.
  7. Where do you get the $100 billion figure?
  8. rmorse

    rmorse Sponsor

    They are not returning any money to share holders from the current balances. The buy back and dividend will come out of current income. The current cash account will still increase. If the current cash is not required for any 5 year plan, they should return all the cash that they don't need to finance current operations.

    I feel this shows a lack of respect to share holders. If they average under 50bp interest, and have no plans for the money, they should return to the owners their cash so they can look for better returns.
  9. They can't buy operating companies that operate as profitably on this scale. So wtf would they throw money at deals? They've 20x what they need for an operating budget and R&D. The cash is not effectively utilized in STIRs.

    So... how many billions do you think they're earning on their US Treasuries? And why is offering a dividend going to cause the company to tank?

    Hilarious thread.
  10. Unless they're holding that cash in Brazilian reals, it's likely they're earning next to nothing on it, and what's the difference between Apple earning the risk-free rate or returning the cash to shareholders so they can earn the risk-free rate?

    They also said, the money is paid out of operating income, so that $100B will stay in place - very important since about 2/3 is held overseas and would be taxed if brought back to the States. It will remain overseas until a new tax regime is in place here.

    None of this means anything for the future of the stock price as that will depend on the ability of the company to keep generating earnings growth.

    The divvie works out to $10.60/year. With even modest earnings growth (akin to MSFT for the last 10 years) and a modestly increasing payout ratio, the dividend could be $100/share in a decade. Again, this says nothing about the fate of the stock price, but math is math.
    #10     Mar 19, 2012