Best of the Week
Most Popular
1.Gold Price Crash Through Key Support, Crude Oil in Freefall - Clive_Maund
2.Marc Faber Warns Japan's Bond-Buying Program is a Ponzi Scheme - Bloomberg
3.Silver Price and Powerful Forces - DeviantInvestor
4.Stocks Bear Market Catastrophe as Stocks Flash Crash to New All Time Highs - Nadeem_Walayat
5.Marc Faber Warns Not to Hold Any Gold in the U.S. - GoldCore
6.U.S. Housing Market San Francisco at Critical Mass - Harry_Dent
7.Global Scramble For Silver - Coins “Hard To Get,” “Premiums Likely To Jump” - GoldCore
8.Major World Stock Market Indices Analysis: SPY, QQQ, DAX, FTSE, CAC, HSI - Michael_Noonan
9.Japan's kaput?! - Axel_Merk
10.Tesco Empire Strikes Back, £5 off £40 Discount Voucher Spend Explained, Exclusions Warning! - Nadeem_Walayat
Last 5 days
Manipulated Stock Market Short Squeezes to Another All Time High - The China Syndrome - 23rd Nov 14
Gold Price 2015 - 22nd Nov 14
Stock Market Medium Term Top? - 22nd Nov 14
Is the Gold And Silver Golden Rule Broken? - 22nd Nov 14
Malaysia's Subsidy and Budget Deficit Conundrum - 22nd Nov 14
Investors Hated Gold at Precisely the Wrong Time: What About Now? - 22nd Nov 14
Gold and GLD ETF Selloff - 22nd Nov 14
Currency Wars, the Ruble and Keynes - 21st Nov 14
Stock Market Investor Sentiment in The Balance - 21st Nov 14
Two Biotech Stocks Set to Double on One Powerful Catalyst - 21st Nov 14
Swiss Gold Poll Likely Tighter Than Polls Suggest - 21st Nov 14
Gold's Volatility and Other Things to Watch - 21st Nov 14
Australia Stock Market and AUD Dollar Analysis (ASX200 and AUDUSD) - 21st Nov 14
New Algae Research May Have Uncovered an “Energy Forest” Under the Sea - 21st Nov 14
The Cultural and Political Consequences of Fiat Money - 20th Nov 14
United States Social Crisis - No One Told You When to Run, You Missed the Starting Gun! - 20th Nov 14
Euro-Zone Tooth Fairy Economics, Spain Needs to leave the Euro - 20th Nov 14
Ebola Threat Remains a Risk - New Deaths in Nebraska and New York - 20th Nov 14
Stock Market and the Jaws of Life or Death? - 20th Nov 14
Putin’s World: Why Russia’s Showdown with the West Will Worsen - 20th Nov 14
Making Money While The World Burns - 20th Nov 14
Why This "Quiet Zone" Is Now Tech Stocks Biggest Profit Sector - 20th Nov 14
My Favorite Stock McDonalds Just Got Kicked Off My “Buy” List - 19th Nov 14
European Economies in Perpetual State of Shock, What's Scarier Than Deflation? - 19th Nov 14
Breakfast with a Lord of War and Nuclear Weapons - 19th Nov 14
The U.S. Economy’s Ebb and Flow - 19th Nov 14
What You Need to Know Before Investing in Alibaba - 19th Nov 14
Forget About Crude Oil Price Testing 2009 Low - 19th Nov 14
What Blows Up First? Part 5: Shale Oil Junk Bonds - 19th Nov 14
Bitcoin Price Did We Just See an Important Slump? - 18th Nov 14
How to Profit From Oversold Crude Oil Price - 18th Nov 14
Stock Valuations Outrunning Profits Growth - And the Band Played On - 18th Nov 14
ECB Buy Gold Bullion? Japan's Monetary Policy Dubbed "Ponzi Scheme" - 18th Nov 14
Gold, Silver, Crude and S&P Ending Wedge Patterns - 18th Nov 14
How High Could USD/JPY Go? - 18th Nov 14
On Obama and the Nature of Failed Presidencies - 18th Nov 14
Globalism Free Trade Immigration Connection - 18th Nov 14
An Epiphany From Hell - Buy Gold and Silver - 18th Nov 14
Too Difficult to Get a U.S. Home Loan - 18th Nov 14
Has the Gold Bear Trap Been Set - 18th Nov 14
Gold Price and Miners Soar on Huge Volume - 17th Nov 14
Cameron Says Second Global Economic Crash is Loomin, Japan in Recession - 17th Nov 14
How to Play the Stock Market 2014 Year-End Rally - 17th Nov 14
What The Fed Has Wrought, Who Needs Wage Earners Anyway? - 17th Nov 14
Stock Market Indexes Fluctuate Along Record Levels - Will Uptrend Continue? - 17th Nov 14
Stock Market Trend Deceleration Tends To Precede Corrections - 17th Nov 14
Stocks Bull Market Set to Continue After Consolidation - 17th Nov 14
The World Is Run By Fools, And We Let Them - 17th Nov 14
Gold Price Golden Bottom? - 17th Nov 14

Free Instant Analysis

Free Instant Technical Analysis


Market Oracle FREE Newsletter

Gold Report 2015

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

© 2005-2014 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

Free Report - Financial Markets 2014