Analyst: Apple Should Use Cash Hoard for Stock Buyback, Dividends

Apple needs to quit sitting on the largest cash hoard in the U.S. business world and return some of the money stockholders in the form of a stock buyback and a shareholder dividend. This, according to Sanford C. Bernstein & Co. analyst Toni Sacconaghi, who wrote in a research note Thursday that it’s time for Apple to commit US$30 billion to a stock buyback and set up a 4% annual dividend.

Apple currently had almost $47 billion in cash on hand and short-term investments at the end of the June quarter, which makes it the richest company in the U.S. in terms of cash-on-hand.

Apple has been steadily accumulating this rather large fortune since Steve Jobs came back to the helm of the company, and though analysts and shareholders alike have often asked Apple to commit to a major stock buyback and/or a dividend, the company has steadfastly said it needs the money to be able to make strategic investments when needed.

Instead of a dividend, company executives in the past have stressed that shareholders have been rewarded by the meteoric rise in the price of shares in the company. Bloomberg, which covered Mr. Sacconaghi’s research note, pointed out that AAPL has risen more than 400% in the last five years, compared to a 2.5% decline in the S&P 500.

Mr. Sacconaghi also said that it was important for the most secretive technology company on the planet to become more transparent with shareholders concerning its plans for its cash, despite the fact that the very lack of transparency in Apple’s plans have been part and parcel of the meteoric rise in the company’s stock.

Mr. Sacconaghi said returning cash to shareholders “would mitigate investor fear of a potentially large, value destroying acquisition and create financial discipline,” resulting in a higher price for the shares.

Shares in Apple closed higher Thursday at $251.79, a gain of $1.60 (+0.64%), on strong volume of 19.1 million shares trading hands.

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