With Apple getting lots of pressure from analysts and shareholders about the hoards of cash on hand, an announcement from Apple is bound to happen soon about what they're going to do with it. My question is, would your prefer an increase in dividends, or a share buy back? Why? What are the pros and cons to each? And what's more likely to happen?
Buyback at these prices. A dividend gets taxed. A buyback immediately adds value (when bought at the right prices, such as today's prices) and costs no tax. If you want a dividend, sell some of your shares and my understanding is that it's a little more tax-effective than getting a dividend. The other problem is that dividends need to be consistent which means Appl will have to pay them out whether they have the money or not, or start a shareholder revolt. I think dividend payouts by a company that has been able to produce as much shareholder wealth as this company has over time has to be one of the stupidest ideas on earth.
Apple needs to ensure they can stay on top selling the highest margin tech products of the day. IMO they will drop any product becoming obsolete or that has falling margins in a heart beat. That is their business strategy and culture and it is VERY SMART.
They will not be like "Atari".
Cook was chosen because he understands the above.
In order to stay on top, you invest in R & D and patents keep a lot of money in case you have to buy patents or buy the next great up and coming tech of the decade. This is what will keep Apple on top selling high margin products.
They are not married to their shareholders. They are married to the idea of making huge profits following this formula of selling high margin products with great customer service. As long as they do that, they will always be top dog.
The share price situation is a joke, propagated by people who don't understand how to run a long term profitable business, many of whom work for banks that needed to be bailed out because they have no clue how to operate. And we're supposed to listen to them? Puhlease! Perhaps they are attacking the share price to attempt to steal in market value the equivalent of Apple's gigantic profits. This does not harm to long term viability of the company known as Apple. It just harms the shareholders, especially those who are on margin.
Bottom line, Apple is a monster of a company. The current share price is a joke. It's worth double this at least.
The market will come to its senses soon imo.
Buyback is the obvious choice. Apple needs to narrow the float. The less shares will bring more demand therefore raise the share price. Anything helps. For every 10 billion dollars, Apple can buyback 23 million shares. So 100 billion will takeout around 200 million or so shares. Thats huge.
There is no reason that AAPL can't increase the dividend. They haven't even began to really profit from China and India. This is a growth and value equity UNTIL saturation in China/India. That is at least a decade away.