Print 31 comment(s) - last by BifurcatedBoat.. on Mar 20 at 5:30 PM

Some shareholders want cash returned as a dividend to investors

Apple continues to be incredibly successful in the technology market and one of the most valuable companies in the world. So far this year Apple is sitting on a cash stockpile that amounts to $137 billion. Some Apple shareholders are upset that the company is sitting on that much cash and isn't paying out dividends to shareholders.

Moody's Investors Services issued a report this week predicting that Apple’s cash stockpile could grow to as large as $170 billion by the end of 2013. That assumes that Apple doesn't change its philosophy towards dividends and stock buybacks. Apple has been under pressure from a hedge fund manager named David Einhorn and other major investors to return some of that cash to shareholders.

Apple has noted that it is in "active discussions" on returning some of that money to investors but no details were offered. Einhorn is currently involved in the suit against Apple that CEO Tim Cook has dubbed "a sideshow."

Moody's wrote, "Unless Apple changes its philosophy towards liquidity/shareholder returns by increasing its $10 billion annual common dividend, or if Apple increases it stock buyback program, we estimate Apple’s cash balances could increase by another $35 billion in 2013 and exceed $170 billion."

When it comes to cash reserves, Apple has roughly twice as much as its closest competitor. Microsoft was sitting on total cash reserves of $68.3 billion as of December 31, 2012. Google is slightly behind with $48.1 billion.
The only non-technology company in the top five biggest cash-rich companies in the United States was pharmaceutical giant Pfizer with $46.9 billion in cash taking the number four spot. Rounding out the top five is Cisco Systems with $46.4 billion in cash.

Source: Market Watch

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The investors are looking for short term gains
By aliasfox on 3/19/2013 12:37:43 PM , Rating: 2
In my opinion, any well run tech company shouldn't be worried about giving dividends to shareholders, even one with as much cash as Apple.

A tech company's only reason to exist is to create new technology, which requires R&D and infrastructure. Any and all excess cash should be pushed in that direction.

I think Apple should kill their dividend and put 10x that amount into additional R&D and a fraction more into marketing.

It's only companies that have run out of ideas that need to put out a dividend. Have you run out of ideas, Apple?

RE: The investors are looking for short term gains
By aliasfox on 3/19/2013 1:43:53 PM , Rating: 3
If you're growing the business by selling new products that come from new ideas, your stock price will naturally go up - investors will then invest because each share should go up in value over time.

If you have a mature business with few growth prospects but lots of revenue, your stock price should be fairly stable - putting out a dividend is the only way for an investor to get a return on their money.

I want ARM, Tesla, and nVidia to put their revenues back into R&D. I want my local utility to pay out a dividend.

By Cheesew1z69 on 3/19/2013 3:37:12 PM , Rating: 1
I was replying to the ridiculous comment of : It's only companies that have run out of ideas that need to put out a dividend.

It's ridiculous and untrue.

RE: The investors are looking for short term gains
By Asetha on 3/19/2013 3:26:55 PM , Rating: 2
People buy shares in tech because it's a capital growth industry. The idea is over time new products come out and generate share growth.

Coca-cola, power generation, these are mature and people buy their shares for stable income.

The reason Apple is paying dividends is because they don't know what to spend the money on.

RE: The investors are looking for short term gains
By aliasfox on 3/19/2013 3:44:22 PM , Rating: 2
Exactly. What scares me isn't that Apple doesn't have something new right now. After all, it was three years between the first iMac and the iPod, over five years between the iPod and the iPhone, and over two years between iPhone and iPad.

What scares me is that by entertaining all of these thoughts on dividends and share buy back, Apple has tacitly admitted that the well has run dry.

Making money the Willy Wonka way is a heckuva lot more interesting for the public (and pundits) than the Wall Street way.

By Asetha on 3/19/2013 4:29:06 PM , Rating: 2
Right. I know there's a lot of money to be made trading options, however I don't engage in it because it adds no value to the economy.

And the dividend is precisely that - Apple has more money than innovation, which is a problem I'm sure many companies would love to have.

RE: The investors are looking for short term gains
By Tony Swash on 3/19/13, Rating: -1
By GulWestfale on 3/19/2013 3:05:26 PM , Rating: 1
wow that sounds totally interesting and exciting!
and if i didn't have a job, girlfriend, hobbies -a life, really- i'd totally put that on an endless repeating loop!
well i would, if i had an "i-device". thankfully, i have a galaxy, like most other sane people.

RE: The investors are looking for short term gains
By Tony Swash on 3/19/13, Rating: -1
By GulWestfale on 3/19/2013 6:28:33 PM , Rating: 1
is he as good at data analysis as your iOS spell-checker is at catching your myriad typos?

By StormyKnight on 3/19/2013 10:23:18 PM , Rating: 2

Pot, meet Kettle. Kettle, Pot...

By Pirks on 3/19/2013 3:26:41 PM , Rating: 2
People, ignore it, it could only be watched on iPhone. Tony failed hard again :)))

By retrospooty on 3/19/2013 5:44:55 PM , Rating: 1
Tehy do care about tech... They dont care about finance and certainly not about Horace Dediu. He is much like you, spends all of his time thinking about Apple and has zero insight or understanding into anything else. As Applecentric as it gets... But still its finance. Might I suggest you take that type of thing here?

By Skywalker123 on 3/19/2013 1:39:36 PM , Rating: 2
the only reason for a business to exist is to make a profit.

By aliasfox on 3/19/2013 1:46:28 PM , Rating: 2
A business exists to create a profit.

A tech business exists to sell technology at a profit.

New technology requires investment in R&D and infrastructure.

By Bateluer on 3/19/2013 11:28:00 PM , Rating: 2
Thats not really how investing works. Shareholders invest and expect results in return. Apple sitting on 100Bn+ in cash, while clearly not actually spending any in R&D or design while bleeding it in the court room, is offensive.

By TSS on 3/20/2013 2:47:26 AM , Rating: 2
I think the investors are looking for any gains. Apple shares where higher then google shares not too long ago, past $700. Now? $450. Some investors lost some serious money there, but they can't sell those losses so they're looking for returns in the mean time.

Atleast that's what i figure.

Best way to use that money
By corduroygt on 3/19/2013 3:32:10 PM , Rating: 3
Buy a cable company or two so they can break their monopoly and revolutionize TV.

RE: Best way to use that money
By Lord 666 on 3/19/2013 11:18:25 PM , Rating: 2
Or just buy Samsung, cable TV, and satellite company such as SiriusXM and/or DirectTV

By smilingcrow on 3/19/2013 10:30:17 AM , Rating: 2
You'd think they could afford chairs! Tight gits.

By BifurcatedBoat on 3/20/2013 5:30:48 PM , Rating: 2
If they were to pay a big dividend, and no longer have such a large pile of cash, the stock price would go down accordingly.

If they were to buy back stock from the investors, the price of the remaining shares would go up accordingly.

If they do nothing and continue to accumulate cash, the stock price will go up based on those cash reserves. Anyone who wants cash can simply sell some stock.

There is no "returning"!
By Shadowself on 3/19/13, Rating: -1
RE: There is no "returning"!
By Treckin on 3/19/2013 12:12:31 PM , Rating: 3
I rarely log in to post, but had to just to point out how wrong you are.

The most obvious way you are wrong is in making a distinction between the corporation and the shareholders. That's the same entity. I believe you are confusing the employees with the corporate entity, which is a common mistake. Some employees own stock, and when they act as stockholders they are acting as the corporation. When not, they're employees.

This is an important distinction because you see, Apple SHOULD be "returning" that money to investors - it certainly isnt doing them very good piling up like timber, right? If you are a stakeholder in Apple, you want that money returned to you as either a dividend or ideally as company growth.

If Apple cant figure out how to SPEND the money in a way which causes their overall valuation to increase (returning money for investors), they need to admit they can no longer grow and yes, share the profits with the stakeholders. Thats the way risk is rewarded in a capitalist society.

typed from my phone sorry for any mistakes.

RE: There is no "returning"!
By UpSpin on 3/19/2013 12:26:23 PM , Rating: 2
If a shareholder does not like how the corporation acts, he can sell his shares. Everyone knows how Apple acts, so they shouldn't be surprised to not receive any dividend or anything more except the value of the share, which is the only thing which belongs to them and not more.

If the company does well, the share rises. If the shareholder forgets to sell his shares then or buys them at its maximum peak then it's his fault if he loses money because of a falling share and not directly Apples.
Sure, Apple could handle counteractive and buy shares up or pay huge amounts of bonuses, but they don't have to.
The only thing you can do is blame them for not using the money for new devices. And if you don't like the way they act, you can sell your share, just as many currently do.

The Apple share constantly increased to a ridiculous amount and shareholders made a lot of money with the Apple share. No one really complained that Apple put back lots of cash.
But then, the Apple shares fell and suddenly big investors want money from Apple. Coincidence?

RE: There is no "returning"!
By half_duplex on 3/19/2013 12:35:49 PM , Rating: 2
You make good points, but I think you are wrong on a few of your facts.

As stated, the money never belonged to share holders. A share holder agrees to the dividend rules when they purchased the stock. They can't cry foul now. They can also get out if they want, they'll come out in the black.

Secondly, that stock pile of cash DOES help strengthen their overall valuation if for no other reason than they haven't misspent it yet.

Hedgefund manager (LOL - ironic) sees $$$ and wants a slice, well, bigger than he's already getting.

RE: There is no "returning"!
By bsd228 on 3/19/2013 2:12:24 PM , Rating: 2
> As stated, the money never belonged to share holders. A share holder agrees to the dividend rules when they purchased the stock. They can't cry foul now. They can also get out if they want, they'll come out in the black.

As stated incorrectly, yes. Let me put it to you this way. If the shareholders, the actual owners of Apple, don't own the assets, who does? There is no one else.

The Board sets the policies, including cash management and the decision to issue dividends, this is correct. But you must also note that they have a fiduciary responsibility to the shareholders. That doesn't mean bankrupt the company giving away 200B in cash this year. But when the company amasses more cash than it can possibly use, the best use is to return the excess to the shareholders. Their refusal to is a factor in the share price drop.

The truth is that Apple cannot make use of this much capital. They made their success by focusing on a very small set of products and doing them well. If they increased their R&D budget 10x, good things will not happen. They will instead become bloated and suffer the pains of failed products, the scourge of discount pricing and expand beyond their core competencies.

I think it's unlikely they can sustain these outsized profits. They've already lost their advantage in phones, and all the lawyers in the world won't protect the ipad forever. They will still be highly profitable, but not at the volume they enjoy today. The stock price will decrease to reflect that new reality when it happens. Meanwhile, the existing shareholders should enjoy some of the happy days.

RE: There is no "returning"!
By half_duplex on 3/19/2013 8:57:32 PM , Rating: 2
You are not wrong, I agree in fact, I'm just pointing out that if the powers that be, in their fiduciary responsibility, feel the share holders are best served by the existence of this pile of cash, than they have every right to proceed this was.

Should a hedge fund manager sue Walmart if he doesn't like their decision to invest in time travel R&D?

RE: There is no "returning"!
By Treckin on 3/19/2013 12:43:38 PM , Rating: 3
I wont reply again except to say that you are sadly confused. Simply because you signed the dividend agreement as it currently stands doesnt mean you arnt a stakeholder. In fact, the large your share count, the larger your voting position is in drafting the dividend agreements.

Additionally, I believe that the stakeholders here are arguing that they should see the return (ROI) as an increase in stock value, which would be generated by direct investment from cash reserves in growth generating expenditure, or in the form of a higher dividend. Keep in mind both of those things, a higher dividend and/or higher growth spending from cash reserves will push the share price up.

Believe me, "sell your shares if you dont like it" is not an approach the board would look favorably upon. You're essentially inciting a run on Apple stock. When everyone who doesn't like it decides to sell, guess what happens to the market price of Apple stock?

RE: There is no "returning"!
By half_duplex on 3/19/2013 2:10:03 PM , Rating: 1
I'm not sadly confused. What you're saying makes sense, but Apple isn't legally obligated to listen to what you, or anyone else, would do if you were boss at Apple, that's my only point.

Owning public stock doesn't give you a seat on the board.

"So if you want to save the planet, feel free to drive your Hummer. Just avoid the drive thru line at McDonalds." -- Michael Asher
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