Best of the Week
Most Popular
1.BrExit Looks Set to Win EU Referendum, Final Opinion Polls Give LEAVE Lead Over REMAIN - Nadeem_Walayat
2.BrExit Morning - New Dawn for Britain, Independence Day! - Nadeem_Walayat
3.LEAVE Wins EU Referendum - Sterling and FTSE Hit Hard, Pollsters, Bookies and Markets All WRONG! - Nadeem_Walayat
4.BrExit to Save Europe from Climate Change Refugee Migration Apocalypse - Nadeem_Walayat
5.Trading BrExit - Stocks, Bonds, Sterling, Opinion Polls, Bookmaker Odds and My Forecast - Nadeem_Walayat
6.EU Referendum Latest Opinion Polls Show LEAVE Halting REMAINs Surge - Nadeem_Walayat
7.Gold And Silver – Insanity Is World “Norm.” Keep Stacking! - Michael_Noonan
8.Trading BrExit - British Pound Plunges, FTSE Stock Futures Slump on LEAVE Shock Referendum Win - Nadeem_Walayat
9.Gold And Silver: Security, And BREXIT - Michael_Noonan
10.BrExit Vote - "The Trend is Set" -- And What You Should Pay Attention to Next - EWI
Free Silver
Last 7 days
Brexit Victory over the EU Globalists - 28th June 16
Brexit Psyop: Greenspan Falsely Blames the Brits for the Crash and Chaos to Follow - 28th June 16
Greenspan Calls Brexit a ‘Terrible Outcome’ as Euro Area Tested - 27th June 16
Stock Market SPX Below Mid-Cycle Support - 27th June 16
Best Holidays for Summer 2016 - 27th June 16
Another Stocks Bear Market? - 27th June 16
BBC EU Referendum Result Highlights - YouGov, Markets, Bookmakers, Pollsters ALL WRONG! - 26th June 16
Investors Map Post-Brexit Strategies Amid Global Market Upheaval - 26th June 16
Gold Price Weekly COT Update - 26th June 16
First the UK, then Scotland ... then Texas? - 26th June 16
Stocks Bear Market Resumes or Just More Noise - 26th June 16
Gold And Silver: Security, And BREXIT - 25th June 16
Dow, Euro & Brexit Recap - 25th June 16
Resistance Holding Gold Stocks after Brexit - 25th June 16
Venezuela vs. Ecuador (Chavismo vs. Chavismo Dollarized) - 25th June 16
Gold, Silver And PM Stocks Summer Doldrums Risk - 24th June 16
Here’s Why China “Economic Hard-Landing” Worries Are Overblown - 24th June 16
Jubilee Jolt: Markets Crash, Gold Skyrockets as Britain Takes Brexit - 24th June 16
BrExit Morning - New Dawn for Britain, Independence Day! - 24th June 16
LEAVE Wins EU Referendum - Sterling and FTSE Hit Hard, Pollsters, Bookies and Markets All WRONG! - 24th June 16
Trading BrExit - British Pound Plunges, FTSE Stock Futures Slump on LEAVE Shock Referendum Win - 24th June 16
EU Referendum Shock Results Putting BrExit LEAVE in the Lead Hitting Sterling Hard - 24th June 16
Final Opinion Poll Gives REMAIN 52% Lead, Bookmakers, Markets and Pollsters ALL Back REMAIN Win - 23rd June 16
Does BREXIT Matter? Outlook for Sterling - 23rd June 16
Keep Calm and Vote BrExit - Last Chance to Break Free of EU Superstate - 23rd June 16
Here’s the Foreign Policy Trump and Clinton Really Want - 23rd June 16
Details Behind Semiconductor Stocks Leadership - 23rd June 16
Trading BrExit - Stocks, Bonds, Sterling, Opinion Polls, Bookmaker Odds and My Forecast - 23rd June 16
BrExit Looks Set to Win EU Referendum, Final Opinion Polls Give LEAVE Lead Over REMAIN - 22nd June 16
Proof that the Gold Bears are Wrong - 22nd June 16
Here’s a Trillion-Dollar Investment Opportunity for Those Few with No Debt - 22nd June 16
BrExit to Save Europe from Climate Change Refugee Migration Apocalypse - 22nd June 16
Increase In U.S. Rig Count Will Not Cap Oil Prices - 22nd June 16
Are Copper and China Stocks Set to Rally? - 22nd June 16
SPX May Break Its Trendline - 22nd June 16
Believe it or Not: More Kids Live At Home Now than Since The Great Depression - 21st June 16
EU Referendum Latest Opinion Polls Show LEAVE Halting REMAINs Surge - 21st June 16
British Pound Outlook - BREXIT, Europe and You - Does your vote matter? - 21st June 16
Fascist Victory Behind the European Union - 21st June 16
EU Referendum Opinion Polls Analysis Shows Strong Momentum in REMAINs Favour - 21st June 16
Is It Time to Dump Gold and Buy Platinum? - 21st June 16
Could Central Bankers Be Gold and Silver's BIGGEST Allies? - 20th June 16
Words Still Mean Things – Brexit With Graham Mehl - 20th June 16
Baroness Warsi the Manchurian Candidate Quits LEAVE for REMAIN, Boris Johnson Next? - 20th June 16
FTSE Soars, Stock Markets Bounce on LEAVE Polls Surge, Bookmakers Widen BrExit Odds - 20th June 16
Brexit Would Trigger Devolution of Europe - 20th June 16
Stock Market Week Of Uncertainty - 20th June 16
Will Gold’s Bullish Price Chart Outperform Gold’s 5 Bearish Indicators? - 20th June 16

Free Instant Analysis

Free Instant Technical Analysis


Market Oracle FREE Newsletter

Why 95% of Traders Fail

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