Best of the Week
Most Popular
1.Crude Oil Price Trend Forecast 2016 Update - Nadeem_Walayat
2.Will Deutsche Bank Crash The Global Stock Market? - Clif_Droke
3.Gold Price In Excess Of $8000 While US Dollar Collapses - Hubert_Moolman
4.BrExit UK Economic Collapse Evaporates, GDP Forecasts for 2016 and 2017 - Nadeem_Walayat
5.Gold Stocks Massive Price Correction - Zeal_LLC
6.Stock Market Predicts Donald Trump Victory - Austin_Galt
7.Next Financial Crisis Will be Far Worse than 2008/09 - Chris_Vermeulen
8.The Gold To Housing Ratio As A Valuation Indicator - Dan_Amerman
9.GDXJ Gold Stocks - A Diamond in the Rough - Rambus_Chartology
10.Gold Boom! End Game Nears As Central Banks Buying Up Gold Mining Companies! - Jeff_Berwick
Last 7 days
Donald Trump Post Debate Meltdown, Betfair Betting Market Points to Collapse in Odds of Winning - 30th Sept 16
Silver Way Undervalued - 30th Sept 16
Why Krugman, Roubini, Rogoff And Buffett Dislike Gold - 30th Sept 16
After the Debate, the Deluge? - 30th Sept 16
Has Dow Theory Lost its Relevance: Stock Market Ignored it and Rallied to New Highs - 30th Sept 16
Donald Trump Failing to Recover After 1st Debate Hillary Shimmy Loss - Betfair Betting Market - 30th Sept 16
BEA Revises Q2 2016 US GDP Growth Upward to 1.42% - 29th Sept 16
Could the OPEC deal set stage for the Next Stock Market Risk Rally? - 29th Sept 16
Why Trump Lost, Hillary Won the 1st U.S. Presidential Debate - 29th Sept 16
Is a Dollar Crash Imminent After the Senate Overrides Obama Veto on Saudi 9/11 Bill? - 29th Sept 16
2017: Gold and Silver's Year of "Public Recognition" - 29th Sept 16
Did Trump Win the 1st US Presidential Election Debate? - There's Something Happening Here... - 29th Sept 16
FED Goes from ZIRP to NIRP! - 29th Sept 16 - Chris_Vermeulen
Here’s Why You Should Be in Cash Right Now - 28th Sept 16
The Fed Put a 50% Tax on Your Retirement Plan - 28th Sept 16
Massive Chinese Debt And Why They Are On A Gold Buying Binge! - 28th Sept 16
Stocks Commodities and FX Markets Waiting Technically While Fundamental Data Neutral Poised - 28th Sept 16
This Commodity Has Perked Up its Investors' Portfolios - 27th Sept 16
Charting the Continuing Gold Market Correction - 27th Sept 16
Stock Market Crash and Recession Indicator Warning: Extreme Danger Ahead - 27th Sept 16
Financial Markets and FX Setups 27th Sept - 27th Sept 16
Crude Oil, Forex and Stock Market Trend Forecasts - 27th Sept 16
Why There is Trump - 27th Sept 16
Save Up to 70% in Shopping Expenses for Daily Items - 27th Sept 16
Gold’s Moving Averages and Long-Term Outlook - 26th Sept 16
September Stock Market - The Not So Silent Demise of Deutsche Bank - 26th Sept 16
SPX sell signal confirmed - 26th Sept 16
SPX is testing the next level of support - 26th Sept 16
Outrageously Entertaining US Presidential Campaign Final Stages - What Happens Next? - 26th Sept 16
BoJ, FOMC and Where To Now? - 26th Sept 16
Stock Market New All Time Highs Next - 26th Sept 16
Why Trump Will Win US General Election 2016 Prediction Forecast - 26th Sept 16
Martial Law Rolls Out Across the US As Jubilee Nears - 26th Sept 16
Stock Market More Correction Likely - 25th Sept 16
US Presidential Election Forecast 2016 - Trump Riding BrExit Wave into the White House - 25th Sept 16
US Economy GDP Growth Estimates in Free-Fall: FRBNY Nowcast 2.26% Q3, 1.22% Q4 - 24th Sept 16
Gold and Gold Stocks Corrective Action Continues Despite Dovish Federal Reserve - 24th Sept 16
Global Bonds: Why Our Analyst Says Things Just Got "Monumental" - 24th Sept 16
Where Did All the Money Go? - 23rd Sept 16
Pension Shortfalls Could Be 4X To 7X Greater Than Reported - 23rd Sept 16
Gold Unleashed by the Fed - 23rd Sept 16
Gold around U.S Presidential Elections - 23rd Sept 16
Here’s Why Eastern Europe Is Doomed - 23rd Sept 16
Nasdaq NDX 100 Big Cap Tech Breakout ? - 23rd Sept 16

Free Instant Analysis

Free Instant Technical Analysis


Market Oracle FREE Newsletter

The Power of the Wave Principle

New Apple Dividend Will Help Push Share Prices Higher

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

By: Money_Morning

Companies

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 :http://moneymorning.com/2012/03/19/new-apple-dividend-will-help-push-shares-higher-nasdaq-aapl/

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: customerservice@moneymorning.com

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

© 2005-2016 http://www.MarketOracle.co.uk - 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

Catching a Falling Financial Knife