Best of the Week
Most Popular
1.UK Housing Market Affordability, House Prices Momentum and Trend Forecast - Nadeem_Walayat
2.Gold and Silver Sector Big Green Light and Low Risk Entry Setup... - Clive_Maund
3.UK Regional House Prices, Cheapest and Most Expensive Property Markets - Nadeem_Walayat
4.US Dollar, CRB, Oil, Gas, Copper and Gold - The Chartology of Deflation - Rambus_Chartology
5.Silver Price, COT, US Dollar Updates and More - Dan_Norcini
6.Will Gold Price Drop Below $1000 Soon? - Brad_Gudgeon
7.UK Regional House Prices Analysis - Video - Nadeem_Walayat
8.Crude Oil Swinging For The Fences - A 20 to 1 Option Play - Bob_Kirtley
9.Fed’s Tarullo: U.S. Interest Rates Liftoff Should Wait for Signs of Inflation - Bloomberg
10.UK Immigration Crisis Hits New Extreme of 336k Net Migration, up 32% on 2014 - Nadeem_Walayat
Last 5 days
U.S. Dollar Remains the reserve currency of the world for a good reason - 1st Dec 15
Why We Won’t See Gold $5,000 - 1st Dec 15
Globalist Lockdown is here to Stay - 1st Dec 15
Bank Regulations Continue To Hinder The U.S. Economic Recovery - 1st Dec 15
Thanksgiving Amid the Terror Threats - 1st Dec 15
Collapsing Global Economic Trade - 1st Dec 15
Gold Demand in China Heading For Record and Reserves - 1st Dec 15
Stock Market Mixed Expectations Ahead Of December, New Economic Data Releases - 30th Nov 15
The First Prophet - The Day God First Spoke to Man - Video - 30th Nov 15
America's Rendezvous With Destiny - The Fourth Turning - 30th Nov 15
Stock Market Consolidation Week - 29th Nov 15
A Black Friday for Gold Prices - 29th Nov 15
Politicians Driving The World Towards War - Fourth Turning - 29th Nov 15
Stock Market Down Monday, Gold Price Bottoming? - 29th Nov 15
Turkey Downs Russian Jet to Draw NATO and US Deeper into Syrian Quagmire - 28th Nov 15
Stock Market Quiet Week as Primary 5 Continues - 28th Nov 15
Black Friday, Weekend for Europe's Migrants - 28th Nov 15
HUI and Gold - Who's Leading Whom? - 28th Nov 15
Gold And Silver - No Ending Action, But End May Be Near - 28th Nov 15
Social and Cultural Distress Dividing The Nation - Fourth Turning - 28th Nov 15
Sheffield Houses Prices 2015, Best Estate Agents As Rated by Buyers and Sellers - 28th Nov 15
Stock Market Top Valuations, at a Critical Juncture - 27th Nov 15
The Top Shopping Opportunity on Black Friday - 27th Nov 15
Economics Is About Scarcity, Property, and Relationships - 27th Nov 15
UK Immigration Crisis Hits New Extreme of 336k Net Migration, up 32% on 2014 - 27th Nov 15
Vauxhall Zafira B Fire Danger Recall - What to Do Video - 26th Nov 15
Triggers In US Dollar Collapse - 26th Nov 15
Apple Stock is a 10-Year Short - Bear Market Environment - 26th Nov 15
U.S. Federal Reserve Rate Hike - 26th Nov 15
George Osborne's War on Buy to Let Sector Trending Towards Doomsday - 26th Nov 15
Will Turkey Drag NATO into War With Russia in Syria? - 25th Nov 15
George Osborne’s Autumn Statement and Spending Review Full Text - 25th Nov 15
Will Fresh QE From ECB Boost Gold? - 25th Nov 15
Sheffield, Yorkshire and Humberside House Prices Forecast 2016-2018 - 25th Nov 15

Free Instant Analysis

Free Instant Technical Analysis

Market Oracle FREE Newsletter

Reasons to Get Excited About Japanese Stocks

New Apple Dividend Will Help Push Share Prices Higher

Companies / Dividends Mar 20, 2012 - 07:51 AM GMT

By: Money_Morning


Best Financial Markets Analysis ArticleDavid Zeiler writes: A new Apple Inc. (Nasdaq: AAPL) dividend will make the stock even more attractive while expanding the pool of potential investors.

Apple announced Monday that starting in September, it will pay a $2.65 quarterly dividend.

Apple also announced a $10 billion stock buyback program to be conducted over three years, beginning in September.

The stock buyback was a bigger surprise to analysts. While too small to move the stock significantly, Apple CEO Tim Cook said the intent is to avoid earnings-per-share dilution from future shares issued to reward employees.

The Cupertino, CA company's enormous pile of cash and investments - over $97 billion as of the end of 2011 - had led to increasingly strident calls for an Apple dividend in recent years.

Yet despite today's investor-friendly moves, some think Apple could have done more.

"The dividend is a start but still not enough," said Money Morning Global Investing Strategist Martin Hutchinson. "It's only about one-third of earnings, or less."

Apple generated $31 billion in cash in its 2011 fiscal year; the new dividend will distribute about $10 billion a year to shareholders. Apple is expected to generate more than $40 billion in cash in fiscal year 2012.

So even with the dividend, Apple generates so much profit each year that its cash pile will continue to grow, just not as fast.

An Apple Dividend as Preventive Medicine
That cash pile worries Hutchinson. He believes that Apple needs to pay out more in dividends not only to reward shareholders, but also to prevent wasting its cash on large acquisitions that would distract management.

He thinks that "at least $50 billion" of Apple's current cash should be distributed to shareholders as a one-time dividend.

Nevertheless, any Apple dividend is a big leap forward for a company that until now has rigidly opposed doing so.

Measured by yield, the Apple dividend of 1.8% is somewhat subpar. While nearly twice the average of other tech companies in the Standard & Poor's 500 Index, it's lower than the 2.1% average yield for the S&P overall.

But in absolute terms, the Apple dividend will be among the highest in the United States.

Such a payout will not only reward current investors, but will attract new ones. Many value funds that required a stock to pay a dividend could not buy Apple. Now they can.

Without new investors, Apple stock would have had a tougher time pushing higher. AAPL has soared of late, rising 47% just this year. But the rapid rise and steep price of nearly $600 a share had caused concern.

"Investors have been wrestling with the question of, 'Who is left to buy the stock?'" Alex Gauna, tech analyst at JMP Securities, told CNN Money.

Higher Apple Dividend
Although some were disappointed the Apple dividend wasn't higher, it's very likely the company will increase it in the future.

In fact, Apple's board may have kept the dividend low to make it easier to raise later. Investors prefer companies that consistently raise dividends.

"We believe management will likely consistently raise the dividend level, given our expectation of strong free cash flow," Scott Craig of Merrill Lynch said.

Apple's other reason for the lower dividend was that two-thirds of its cash pile -- $64 billion - sits overseas.

If Apple were to use any of that money to pay out dividends, it would have to pay the 35% U.S. corporate income tax first.

Like many other large multinational corporations, Apple hopes a corporate tax holiday will allow it to bring most of that money home at a rate as low as 5%.

Congress last granted such a holiday back in 2004. A new holiday would open the door for Apple to distribute even more money to shareholders.

Until - and unless - that happens, most analysts see the new Apple dividend bearing fruit for investors.

"We believe the announcement holds promise for all types of investors; growth, value and income - which should attract more shareholders," said Ben Reitzes of Barclays.

Editor's Note:

There's a great way to invest in Apple - without investing in Apple.

Money Morning's Martin Hutchinson has found an Apple supplier heavily involved in providing technology for the new iPad.

Since he recommended this stock five months ago, it's up 23.5%.

But a bigger payoff is coming. Much bigger... And its shares remain ridiculously cheap.

The full details can be found today in our premium service, Private Briefing, in a report called: Our Apple Inc. Strategy Pays Off --Big.

To get access to this report, and all previous Private Briefing recommendations, just go here.

Source :

Money Morning/The Money Map Report

©2012 Monument Street Publishing. All Rights Reserved. Protected by copyright laws of the United States and international treaties. Any reproduction, copying, or redistribution (electronic or otherwise, including on the world wide web), of content from this website, in whole or in part, is strictly prohibited without the express written permission of Monument Street Publishing. 105 West Monument Street, Baltimore MD 21201, Email:

Disclaimer: Nothing published by Money Morning should be considered personalized investment advice. Although our employees may answer your general customer service questions, they are not licensed under securities laws to address your particular investment situation. No communication by our employees to you should be deemed as personalized investent advice. We expressly forbid our writers from having a financial interest in any security recommended to our readers. All of our employees and agents must wait 24 hours after on-line publication, or after the mailing of printed-only publication prior to following an initial recommendation. Any investments recommended by Money Morning should be made only after consulting with your investment advisor and only after reviewing the prospectus or financial statements of the company.

Money Morning Archive

© 2005-2015 - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.

Post Comment

Only logged in users are allowed to post comments. Register/ Log in

Biggest Debt Bomb in History