Money Manager Expects “Significant” Apple Dividend in 2012

| Apple Stock Watch

Money Manager Howard Ward of Gamco Investors Inc said on Tuesday that he believes Apple will be announcing a “significant” dividend in the first half of 2012. The analyst didn’t cite sources, but he stated categorically that the company will be issuing a dividend next year.

Huge Piles of AAPL Cash

In an interview on Bloomberg TV, Mr. Ward said, “Apple’s going to pay a dividend next year. It’s going to be significant. They’re going to have a hundred billion dollars in cash on the balance sheet at year end. My goodness, they don’t need all that. They can leave that on the balance sheet, still pay out a nice dividend, and still grow the cash hoard.”

Since the return of the late Steve Jobs to Apple in 1997, the company has never paid a dividend—Mr. Jobs often made that dividends were for companies that weren’t growing. He also once said that he wanted to “keep the powder dry,” meaning that the company wanted to keep its cash handy in case it wanted to buy something or make some other strategic investments.

In the meanwhile, Apple also has a track record for leveraging that money to secure favorable component deals, and the company has made many direct investments in its supply chain.

Apple has even made a few acquisitions over the last ten years, but far fewer than other large tech companies, and always in small companies that brought people or technology it needed, rather than large companies that could provide new revenue streams for Apple. In recent days, for instance, Apple has been reported to be in the process of buying Israeli Flash memory firm Anobit for US$500 million.

The reality, however, is that Apple’s cash hoard as continued to increase in leaps and bounds, and some institutional shareholders and analysts have been increasing pressure on Apple to begin spending some of that money on stock dividends or a share buyback.

On October 18th, newly ordained Apple CEO Tim Cook said during Apple’s quarterly conference call with analysts that, “I’m not religious about holding cash or not holding it. The cash that we do spend, we’re doing an extremely good job of it and we’re very frugal about using it and using it in the right places.”

This marked the first indication of any sort that there might be a change in Apple’s cash plans, which brings us back to Gamco’s Howard Ward. Mr. Ward, who noted that AAPL is the largest holding in the $36.1 billion he manages at Gamco, was quite definitive in his statement. “Apple’s going to pay a dividend next year. It’s going to be significant.”

As a definitive statement, it makes for a sexy story and sexier headlines, but without sourcing the basis for that statement, it’s impossible to know whether this is leaked information he is privy to or an opinion based on common wisdom that $100 billion is simply more money than a company needs to have on hand to do anything it wants. This is especially true with Apple, which has heretofore never spent anything close to even $1 billion making outside acquisitions.

Shares in AAPL have posted a strong rally during Tuesday’s sessions, and are currently trading at $394.57, up $12.36 (+3.23%), on moderate volume.

*In the interest of full disclosure, the author holds a tiny, almost insignificant share in AAPL stock that was not an influence in the creation of this article.

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Comments

geoduck

without sourcing the basis for that statement, it?s impossible to know whether this is leaked information he is privy to or an opinion based on common wisdom that $100 billion is simply more money than a company needs to have on hand to do anything it wants.

Or option #3: He holds a lot of AAPL and is trying to push the stock to make a quick buck. A quick surge to $425 or so from this rumor could net him a fair profit.

skipaq

I may be wrong; but didn’t Apple pay a dividend in the early 1990’s. Thought I read somewhere that Steve Jobs put an end to it. But I could have that all wrong.

macHobbes

“Historically, Apple has never paid a dividend”.
This is stated repeatedly, but I do remember that in the early nineties I did receive a dividend on my few apple shares.
Unfortunately I can not quote a source.

macHobbes

skipaq

Just saw this and if it is right then half what is said above is correct. From Mac Rumors:
“Apple began offering a quarterly dividend to investors in mid-1987, but canceled it at the end of 1995 as the company foundered. With the return of Steve Jobs, the company was eventually able to turn itself around and become one of the world’s largest companies, but has so far been unwilling to offer dividends again, opting instead to hold onto its profits for its own uses.”

Bryan Chaffin

My mistake, folks, though it was an error of clarification. I said, “historically,” but I was thinking of Apple’s contemporary era. I clarified the story to specify “since the return of Steve Jobs,” whose philosophy was the guiding force of the company when it comes to the issue of a dividend.

Thanks for the notes!

Lee Dronick

We need a poll on this

If you are an Apple stockholder do you want a dividend?

No

Bryan Chaffin

That’s nuts, Lee, with a caveat. smile

As a shareholder, there is only one rational reason to not want a dividend or stock buyback, and that’s if you think Apple needs all of its cash to do whatever it wants to do.

If you think Apple needs all $81 billion it has, or the $90-$100 billion it will have this this quarter, then not wanting a dividend makes sense.

Otherwise, the money belongs to the shareholders, not Apple Inc.

I can’t make any case at all for Apple to keep more than $60 billion on hand as a matter of policy. That’s because that’s twice what I think is at the extreme end of what the company might actually need at any given time. To clarify: I think $30 billion is at the EXREME end of what Apple might need, so doubling that allows Apple to “keep its powder dry,” while returning the excess to us, the shareholders.

When Apple was amassing its fortune, I was consistently critical of analysts and fund managers who were calling for a dividend, but once Apple crossed the $60 billion mark, the case for a dividend hit the tipping point.

$100 billion is simply nuts, and we will hit that by the end of the March quarter at the latest. Some of that money needs to be returned to shareholders, and put back to work in the economy, too.

Lee Dronick

As a shareholder, there is only one rational reason to not want a dividend or stock buyback, and that?s if you think Apple needs all of its cash to do whatever it wants to do.

I almost made my vote “No, this year.” because as a stockholder I want to see them strengthen their position. Also to move more manufacturing back on shore.

Neil Anderson

Yes dividend and a 10 to 1 stock split. smile

Lee Dronick

and a 10 to 1 stock split

Yes smile

rwahrens

Yes dividend and a 10 to 1 stock split.

I concur.

RonMacGuy

I vote for free Apple products to shareholders in lieu of dividends!!  grin

RonMacGuy

On a more serious note, Apple could easily drop prices across the board, drop their quarterly cash receivables to only $2B-$3B instead of the $8B-$9B they currently bring in, and increase market share, if they chose to do so.  But I think they are pretty satisfied with where they are, so I doubt we will see this.  But, it does position them to more selectively target some areas with more competitive pricing, maybe in the MacBook entry level line.  Why not come out with a $699 MacBook?  Maybe they will only make 5%-10% instead of 40% +, but think of the growth!!  Or that $299 iPad Gen 2 when the Gen 3 comes out.  Still makes money on it, so why not?  In some ways Apple constrains themselves in regards to growth.

Lee Dronick

Apple could easily drop prices across the board, drop their quarterly cash receivables to only $2B-$3B instead of the $8B-$9B they currently bring in, and increase market share, if they chose to do so.? But I think they are pretty satisfied with where they are, so I doubt we will see this.?

Yeah, probably not and I think that it would be a death knell.

On the subject of splits what are the factors that trigger that? My Apple stock has split several times.

skipaq

A stock split is decided on by the Board of Directors. There are a lot of factors that they consider like how many outstanding shares there are and what would be the affect be of doubling or tripling that number.

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