Long Term Dividend Growth

  • Posted: 21 February 2012 09:13 AM

    Since AAPL is vastly undervalued, my take is that a share repurchase plan would be best for shareholders.

         
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    Posted: 21 February 2012 09:29 AM #1

    Why?

    EPS multiple in valuations, just falls and falls no matter how much MORE MONEY they actually make.

    Why do you think LESS SHARES used would have any impact whatsoever, when rising PROFITS only result in lowered valuation metrics?

    No, a DIVVY would be nice, mostly because it would expand the sphere of potential institutional holders to those who’s mandated charters restrict ownership to large caps paying a divvy. Immediately, that would open up vast new blocks of potential owners.

    Secondly, a split would do the most to increase the price. Technically neutral { so don’t bring that up }, but psychologically important, it would remove the “Apple is TOO EXPENSIVE” mantra, however misinformed that might be, you know that it is a reality, even the so called “expert talking heads” on TeeVee continually go on and on, about “how expensive Apple is.”

    My two {preinflationary} cents

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  • Posted: 21 February 2012 09:34 AM #2

    TanToday - 21 February 2012 01:29 PM

    Why?

    EPS multiple in valuations, just falls and falls no matter how much MORE MONEY they actually make.

    Why do you think LESS SHARES used would have any impact whatsoever, when rising PROFITS only result in lowered valuation metrics?

    No, a DIVVY would be nice, mostly because it would expand the sphere of potential institutional holders to those who’s mandated charters restrict ownership to large caps paying a divvy. Immediately, that would open up vast new blocks of potential owners.

    Secondly, a split would do the most to increase the price. Technically neutral { so don’t bring that up }, but psychologically important, it would remove the “Apple is TOO EXPENSIVE” mantra, however misinformed that might be, you know that it is a reality, even the so called “expert talking heads” on TeeVee continually go on and on, about “how expensive Apple is.”

    My two {preinflationary} cents

    +1.02

         
  • Posted: 21 February 2012 09:53 AM #3

    Although it seems counter intuitive has anyone considered both a buyback and split which would return cash without the immediate tax implications of a dividend. It allows shareholders to grow their shares only paying taxes when redeeming them. It may not be a long term solution but if the buyback was done from US cash it would have zero tax implications if my understanding of the situation is correct

         
  • Posted: 21 February 2012 10:26 AM #4

    Why can’t Apple buy back and cancel shares outside the USA? Neither the stock nor the cash has to be returned to the US.

    If that’s viable, I’d expect a little tester to possibly be done first, in the same way that, before iPhone deferred revenue accounting was used, Apple created a legal precedent on a small scale with a $2 deferred charge to “activate” the 802.11n hardware present but undeclared in MacBooks. Having the $2 accepted by auditors and the SEC meant there couldn’t be objections to the strategic iPhone revenue deferral.

         
  • Posted: 21 February 2012 11:06 AM #5

    TanToday - 21 February 2012 01:29 PM

    Why?

    Secondly, a split would do the most to increase the price. Technically neutral {so don’t bring that up}, but psychologically important, it would remove the “Apple is TOO EXPENSIVE” mantra, however misinformed that might be, you know that it is a reality, even the so called “expert talking heads” on TeeVee continually go on and on, about “how expensive Apple is.”

    But technically neutral is exactly the point.  Investors do not think in terms of how many shares they can buy, they think in terms of they have to invest.

    If an investor only has $600 to invest (an investor that is not going to move AAPL) it doesn’t matter if they one a single share for $500, or 10 shares for $50 each.  Any investor that can not think on the level isn’t going to be an investor that will make a material difference to the value of AAPL.  Anybody beating that drum is appealing to the lowest common denominator investor.  That investor is not one that will have large sums to invest.  Period.

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  • Posted: 21 February 2012 11:16 AM #6

    My point is that if you think a stock is vastly undervalued you are bound to think that a share buy back plan is beneficial to the shareholder of this stock whereas a dividend has no effect on shareholder wealth

         
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    Posted: 21 February 2012 11:33 AM #7

    Hamourabi - 21 February 2012 03:16 PM

    My point is that if you think a stock is vastly undervalued you are bound to think that a share buy back plan is beneficial to the shareholder of this stock whereas a dividend has no effect on shareholder wealth

    I agree.

    I am of the opinion that is what we will see.  We will see a one time dividend and a share buy back program.

    A one time dividend gives the company flexibility and does not commit them to a long term decrease in cash.  They could always do another one time dividend in 2 to 3 years.

    Buying back stock will increase the stock price much the same way as a regular dividend. 

    I am not sure Apple needs or wants new investors, but instead wants to address the concerns of present stock holders.

    I think we could see a split next year, but I fail to see how it benefits Apple as a company.

         
  • Posted: 21 February 2012 11:42 AM #8

    TanToday - 21 February 2012 01:29 PM

    Why?

    EPS multiple in valuations, just falls and falls no matter how much MORE MONEY they actually make.

    Why do you think LESS SHARES used would have any impact whatsoever, when rising PROFITS only result in lowered valuation metrics?

    No, a DIVVY would be nice, mostly because it would expand the sphere of potential institutional holders to those who’s mandated charters restrict ownership to large caps paying a divvy. Immediately, that would open up vast new blocks of potential owners.

    Secondly, a split would do the most to increase the price. Technically neutral { so don’t bring that up }, but psychologically important, it would remove the “Apple is TOO EXPENSIVE” mantra, however misinformed that might be, you know that it is a reality, even the so called “expert talking heads” on TeeVee continually go on and on, about “how expensive Apple is.”

    My two {preinflationary} cents

    I could not agree more.  A divvy is perhaps more likely than a stock split based on recent comments by Tim.  However, both be fantastic for the stock.

         
  • Posted: 21 February 2012 12:50 PM #9

    Hamourabi - 21 February 2012 01:13 PM

    Since AAPL is vastly undervalued, my take is that a share repurchase plan would be best for shareholders.

    This is the wrong question. It isn’t either or on these topics. AAPL can and will do both. They can afford a massive dividend (~5% at today’s price) and a massive buyback ($25B this year) without denting its current cash hoard. So, I suspect we’ll get roughly half of each of these amounts in the not too distant future.

         
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    Posted: 21 February 2012 01:31 PM #10

    Gregg Thurman - 21 February 2012 03:06 PM
    TanToday - 21 February 2012 01:29 PM

    Why?

    Secondly, a split would do the most to increase the price. Technically neutral {so don’t bring that up}, but psychologically important, it would remove the “Apple is TOO EXPENSIVE” mantra, however misinformed that might be, you know that it is a reality, even the so called “expert talking heads” on TeeVee continually go on and on, about “how expensive Apple is.”

    But technically neutral is exactly the point.  Investors do not think in terms of how many shares they can buy, they think in terms of they have to invest.

    If an investor only has $600 to invest (an investor that is not going to move AAPL) it doesn’t matter if they one a single share for $500, or 10 shares for $50 each.  Any investor that can not think on the level isn’t going to be an investor that will make a material difference to the value of AAPL.  Anybody beating that drum is appealing to the lowest common denominator investor.  That investor is not one that will have large sums to invest.  Period.

    Couldn’t disagree more Gregg. I’d suggest you turn on CNBC sometime and see how many professional investors call AAPL “expensive” at $500+.

    And last time I checked, everyone currently in the market already owns Apple. Retail investing remains at a very low level. I’d love Joe Sixpack to come back in and buy Apple.

    You really think Apple would be trading here at $2040 without the last two splits?

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  • Posted: 21 February 2012 02:39 PM #11

    One guy with $600, or maybe 200,000 guys with $600, this month?

         
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    Posted: 21 February 2012 05:31 PM #12

    I have had a number of friends who are small investors tell me that “Apple is too expensive for me.” I then explain that a $10K investment in Apple costs exactly as much as a $10K investment in Microsoft or anyone else, but they still have a difficult time getting past the high stock price.

    Granted, these are small investors who probably wouldn’t make much of a dent in APPL’s price, but I would think that there are even a number of larger investors who should know better but can’t get past the 500+ price, thinking they have missed the big run-up and they’ll be smart by not buying high.

    A couple of times I have even heard the business media say “the easy money has already been made on Apple.” I’m not sure they would say that if the price was down around $100.

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  • Posted: 21 February 2012 06:10 PM #13

    Boughtnheld - 21 February 2012 09:31 PM

    I have had a number of friends who are small investors tell me that “Apple is too expensive for me.” I then explain that a $10K investment in Apple costs exactly as much as a $10K investment in Microsoft or anyone else, but they still have a difficult time getting past the high stock price.

    Granted, these are small investors who probably wouldn’t make much of a dent in APPL’s price, but I would think that there are even a number of larger investors who should know better but can’t get past the 500+ price, thinking they have missed the big run-up and they’ll be smart by not buying high.

    A couple of times I have even heard the business media say “the easy money has already been made on Apple.” I’m not sure they would say that if the price was down around $100.

    I agree. I’ve got friends and family who think this way too. Additionally, if you had $1000 to invest, you can currently afford 1 share, leaving $486 that can only be spent on other stocks or cash. If the stock price were lower, you could get closer to fully invested in AAPL.

    I don’t think that has any impact on how the company works, but even though the entry-level shareholder might not make a huge dent, making the stock more affordable to entry level shareholders is a good thing in my opinion.

    My hunch is that there will be a bit of a buy-back, a dividend AND a 4-1 split.

         
  • Posted: 21 February 2012 06:59 PM #14

    TanToday - 21 February 2012 01:29 PM

    Why?

    EPS multiple in valuations, just falls and falls no matter how much MORE MONEY they actually make.

    Why do you think LESS SHARES used would have any impact whatsoever, when rising PROFITS only result in lowered valuation metrics?

    No, a DIVVY would be nice, mostly because it would expand the sphere of potential institutional holders to those who’s mandated charters restrict ownership to large caps paying a divvy. Immediately, that would open up vast new blocks of potential owners.

    Secondly, a split would do the most to increase the price. Technically neutral { so don’t bring that up }, but psychologically important, it would remove the “Apple is TOO EXPENSIVE” mantra, however misinformed that might be, you know that it is a reality, even the so called “expert talking heads” on TeeVee continually go on and on, about “how expensive Apple is.”

    My two {preinflationary} cents

    Exactly!  Been saying this for a year now.

    [ Edited: 21 February 2012 07:04 PM by Zeke ]      
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    Posted: 21 February 2012 10:41 PM #15

    I’m in favour of all 3 -  an recurring dividend, a share buy back & a split.

    1. Recurring dividend

    - brings in new investors/funds that only invest in income/dividend stocks.
    - helps create a floor on apples share price, the cheaper apple gets the more attractive its dividend payout is, and brings in buyers if it goes lower.
    - gives holders of apple shares cash every year to buy more shares.

    2. A share buyback

    - Apple IS hugely undervalued. If anyone I know with spare cash asks me what they should do with it, I tell them to buy AAPL shares. Apple has spare cash to invest surplus to any operational & strategic requirements- why shouldn’t it invest its spare money in shares of the worlds best company?
    - its a simple equation, every share apple buys back increases the earnings per share of all shares still outstanding. if apple buys back 10% of outstanding shares, then we can all raise our EPS and related Price targets on AAPL by 10% (for quite a few people here I’m guessing that a 10% in their apple portfolio value would be a six or seven figure payday).

    3. Stock Split

    - Completely agree that a stock split would be almost purely for psychological reasons, but still think its a good idea. I think after a 10 for 1 stock split, it will be much easier for apple to go from $50 per share to $100 per share, than it would be to go from $500 to $1000 a share currently.
    - a lower share price would mean an easier entry into the DOW index (not that apple cares at all about that I think), which would open up some more index funds to buying AAPL.

    Just my opinion of course - good reason for a sensible debate I can learn from.

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    - Long Apple
    - Pro: Apple HDTV, iPhone Air, Stock split, Consumer robotics