It's no secret: Apple's got more cash than they know what to do with!
Investors criticizing the company for “hoarding too much cash” may be well on their way to a pleasant dividend return as the company seriously explores the possibility for dividends...
According to Bloomberg, Apple is likely to introduce a quarterly dividend of about $2 per share before the end of this year now that it has acquired far more than it needs to sustain itself with shareholders.
A $2 dividend translates to hundreds of millions dollars in additional revenue for Apple's highest institutional investors.
Fidelity Management & Research Co., Apple’s biggest investor, stands to make about $97.2 million each quarter, based on its holding of 48.6 million shares at the end of 2011. Vanguard Group Inc., the No. 2 holder, would make $74.4 million, while State Street Corp., Apple’s third-largest investor, would make $69.5 million.
Instituting a dividend might also provide a long-term boost to Apple’s stock price by bringing in investors who are restricted to buying shares in dividend-paying companies, said Toni Sacconaghi, an analyst at Sanford C. Bernstein & Co., and Sterne Agee’s Wu. With interest rates so low, investors are putting more money into dividend-paying stocks that regularly return money to shareholders, Wu said.
Analysts at JPMorgan Chase & Co., Morgan Stanley, Mizuho Securities USA Inc., and Sterne Agee & Leach Inc. all predict that Apple will institute a dividend in the very near future.
Apple's strong business model and stockpiles of cash make it an alluring business to invest in confidently; adding a dividend into that equation could have a dramatic influence on interested investors.
Implementing dividends for shareholders would gain a great deal of investor appetite, including Berkshire Hathaway's billionaire investor Warren Buffet.
Forbes reports on the little technicalities that are expected to truly spark Mr. Buffett's interest in Apple stocks:
“What Buffett is finally seeing in Intel is precisely what I’ve been writing about for a very long time. Within months of Otellini’s appointing as CEO that his first mission was to change the culture and the operating model . At this juncture, the odds of INTC’s franchise value being disrupted by competition are lower than the odds AAPL faces.” He went on. “That said, if AAPL were to reduce the cash hoard by paying a one time dividend of $50, which would still leave it with $50B, and institute a ~3% annual dividend on what would then be a lower price (the stock would drop an amount roughly equal to the one time dividend), it would almost certainly attract dividend investors and move up on Buffett’s radar screen.”
Cris Valerio and Sheila Dharmarajan with Bloomberg Television's "In the Loop,” along with Lawrence Haverity, portfolio manager at Gamco Investors Inc., discuss the outlook for Apple. Find out how the company plans to use it's $97.6 billion in cash investments:
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