What if Apple's EPS from operations dropped to a steady $35/year, and they instituted a 50% dividend payout ratio?
That would equate to $17.50 in annual dividends (a whopping 4.13% yield for those who buy at the current $424 price). Then they would add $16.43 billion to their cash pile every year. Even with that aggressive dividend, Apple would have $200 billion in cash (more than half of its current market cap) by the end of 2015. And of course, none of this factors in the snowballing interest that the cash hoard will earn.
At these levels, Apple is a very safe INVESTMENT even if growth completely stops for good.
you can't be serious. companies NEVER give away their cash hoard. the token dividend will always remain a token dividend. you'll never see the lion's share. take a look at CSCO, MSFT, ORCL and DELL just to name a few. sure, its your money they are holding, but you'll never seen any of it but crumbs, you can bet on that.
If its EPS did drop 20% down to $35, its P/E will drop even more, probably down to 7 or 8. It means the price will be way under $300. It may be a safe investment at that price but it isn't at the current price.
You must disarm bombs for a living, if you think this is a safe investment.
While I agree that AAPL may be oversold, just like everyone else, I have to first see some brand new product categories from the company, before I invest. Until then, ill just daytrade this stock.
Are you supposed to make sense? Obviously, a $35/year EPS factors in significantly reduced margins. Do I think earnings are really going to fall that far? No.
If EPS did somehow fall 20% and stay there, that would mean continuing to hoard cash would be completely unnecessary, and there would only be four viable options:
1 - Massive special dividend.
2 - Massive share buyback.
3 - High dividend ratio (50% or higher would be completely justifiable if they didn't want to dip into their pile).
4 - Some combination of the first three options.
All four options would lead to very safe returns in my long-term portfolio.
haw. i do not believe growth will stop; all who claim this is not a growth compnay r wrong.... many many in the world want Apple products, and very very few addicts of apple products switch... in China, alone, market penetration has barely begun..... maybe growth will stop in the year 2025; but for the moment this formerly 'HYPER-Growth" company remains a 'Growth Company' ----- you are right about this being about the safest investment out there... draw a decent deivindent AND enjoy Capitol Gains to boot...