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Apple Announces Plans to Initiate Dividend and Share Repurchase Program

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Re: Apple Announces Plans to Initiate Dividend and Share Repurchase Program

#61

Post by beatle »

programminggeek wrote: post #47

I hate to say this is a bad idea, but dividends signal to the market that you have no better way to spend your money than just giving it back to investors to spend elsewhere. Combining a stock buyback plan is smart at least because perhaps they can balance the two and counteract the dividend effect by buying up shares. In reality Apple could probably just become a private company by buying back most/all the public sh…

I was right about Apple's plans to repurchase its own stock. I guess I was a little surprised by the quarterly dividend and the amount of money it plans to spend ($45b over 3 years).

Then I realized Apple earned $13b profit last quarter and it's only going to grow. $15b x 4 quarters = $60b PROFIT PER YEAR.

Not all of their profit will be used for the share buy back/dividend, but Apple can easily afford it and still have MORE cash (specially after you factor in cash inflow from its investing activities).

Re: Apple Announces Plans to Initiate Dividend and Share Repurchase Program

#62

Post by astrodust »

Me1000 wrote: post #54
programminggeek wrote: post #47

I hate to say this is a bad idea, but dividends signal to the market that you have no better way to spend your money than just giving it back to investors to spend elsewhere. Combining a stock buyback plan is smart at least because perhaps they can balance the two and counteract the dividend effect by buying up shares. In reality Apple could probably just become a private company by buying back most/all the public sh…

Apple's cash reserves grew about $30B last year, they're announcing that they're going to spend $45B over the course of 3 years. Assuming the current cash reserve growth continues at the same rate, I really don't think the market will look at the dividends as not knowing how to spend their money...

They know how to spend the money they have. The "problem" is that they keep making tons more.

Re: Apple Announces Plans to Initiate Dividend and Share Repurchase Program

#63

Post by marbletiles »

programminggeek wrote: post #47

I hate to say this is a bad idea, but dividends signal to the market that you have no better way to spend your money than just giving it back to investors to spend elsewhere. Combining a stock buyback plan is smart at least because perhaps they can balance the two and counteract the dividend effect by buying up shares. In reality Apple could probably just become a private company by buying back most/all the public sh…

"In reality Apple could probably just become a private company by buying back most/all the public shares, but I doubt they want to do that."

They can't use the shareholders' money (which is what this is) to take themselves private. You can't buy something from someone with their own money.

EDIT: Any of these downvoters care to explain themselves? Apple can't buy back most/all of the public shares using this pile of cash, because it belongs to Apple, which belongs to its shareholders. (Even if they could afford to do it, which they can't)

Re: Apple Announces Plans to Initiate Dividend and Share Repurchase Program

#64

Post by andylei »

programminggeek wrote: post #47

I hate to say this is a bad idea, but dividends signal to the market that you have no better way to spend your money than just giving it back to investors to spend elsewhere. Combining a stock buyback plan is smart at least because perhaps they can balance the two and counteract the dividend effect by buying up shares. In reality Apple could probably just become a private company by buying back most/all the public sh…

> dividends signal to the market that you have no better way to spend your money than just giving it back to investors to spend elsewhere

this is exactly what they're trying to signal because its true. what's wrong with that? they've been extremely profitable while not spending the $45 billion they're giving back to shareholders, and they can continue to be profitable without it.

> In reality Apple could probably just become a private company by buying back most/all the public shares

no it couldn't. it's market cap is 550B. it's cash reserve is 100B.

more generally, a company cannot buy itself because the shareholders actually own the cash the company holds. generally, if a company has $X dollars of cash reserves, then the market cap on that company would be > $X.

edit: a factor of 10

Re: Apple Announces Plans to Initiate Dividend and Share Repurchase Program

#65

Post by chalst »

programminggeek wrote: post #47

I hate to say this is a bad idea, but dividends signal to the market that you have no better way to spend your money than just giving it back to investors to spend elsewhere. Combining a stock buyback plan is smart at least because perhaps they can balance the two and counteract the dividend effect by buying up shares. In reality Apple could probably just become a private company by buying back most/all the public sh…

Both dividends and repurchasing are ways to distribute money to shareholders, and are from the point of view of the Miller--Modigiani theorem equivalent: from this abstract viewpoint, neither should affect the value of shares.

The differences are

1. Buybacks are usually more tax efficient, because with dividends, profits are realised at the point of sale;

2. Buybacks tend to be procyclical, since companies get a bargain when their shares are undervalued and overpay when they are overvalued. There is some evidence that overall, companies do not get good value for their shareholders from share buybacks. Also, many stock options have the effect that buybacks reward shareholders better than dividends.

I think a mixed dividend and buyback policy is wise. Apple shouldn't be hoarding the cash, and they shouldn't make poor value acquisitions.

To take themselves off the stock exchange, they would need to issue bonds valuing around $500 million, and so become a highly indebted company. This would be tricky, and it is not obvious why this would be in Apple's interest.

Re: Apple Announces Plans to Initiate Dividend and Share Repurchase Program

#66

Post by astrodust »

adnam wrote: post #45
bbhacker wrote: post #18

I am in no position to tell Apple how they should spend their money but after reading the articles about Elon Musk today I can't help but imagine how the world could be changed to become a better place with all this money. And I don't mean that Apple should give money away to charities. Why not invest in space exploration , electric cars, self-driving cars, medical devices, green energy,... It is not Apple's core bus…

>> Apple has moved humanity forward Twaddle.

Why are you so dismissive? Apple is not the only company that has done this.

Many companies had MP3 players prior to the iPod, but it was Apple's device that completely up-ended the music industry. Now people have access to entire libraries of music on their phone, and a store where they can buy even more.

Can you really say the situation would be better if Apple had blown out in the 1990s and we were at the mercy of Rio and RealPlayer?

Re: Apple Announces Plans to Initiate Dividend and Share Repurchase Program

#67

Post by eugenegamma »

andylei wrote: post #64
programminggeek wrote: post #47

I hate to say this is a bad idea, but dividends signal to the market that you have no better way to spend your money than just giving it back to investors to spend elsewhere. Combining a stock buyback plan is smart at least because perhaps they can balance the two and counteract the dividend effect by buying up shares. In reality Apple could probably just become a private company by buying back most/all the public sh…

> dividends signal to the market that you have no better way to spend your money than just giving it back to investors to spend elsewhere this is exactly what they're trying to signal because its true. what's wrong with that? they've been extremely profitable while not spending the $45 billion they're giving back to shareholders, and they can continue to be profitable without it. > In reality Apple could probably jus…

You're off by a factor of 10 there but the claim is still true.

Re: Apple Announces Plans to Initiate Dividend and Share Repurchase Program

#68

Post by astrodust »

jsumrall wrote: post #11

After reading the article about SpaceX, I think Apple should start their own program. They can afford it. SpaceX is being paid less than 2 billion to go to the space station. I'm thinking: iRocket iSpaceShip iStation See, there a product family already. And the best part is that the iSpaceShip can only dock with an iStation. So you gotta buy everything.

Apple has shown it's unwilling to invest in things it can't turn into a huge win. It's not being run by Howard Hughes.

Re: Apple Announces Plans to Initiate Dividend and Share Repurchase Program

#69

Post by tptacek »

_delirium wrote: post #59
InclinedPlane wrote: post #43

Earlier quoted context omitted.

The board aren't the owners, they're just the board, the owners are the share holders. The company literally belongs to them, as does this money.

That's true, but the shareholders have delegated the decision on how to spend the money to their legal representatives on the board. There's a strong presumption that the shareholders have elected board members whose decisions they support, so if the board makes decisions and the shareholders don't vote them out, those are presumed to express the preferences of the shareholders. Note that those decisions do not have…

So, the clarity you've added here is neat (I hadn't drilled down into the specifics of what "fiduciary duty" meant in law, and also had been using "maximize shareholder value" as a shorthand for it), but if you search, you'll find lots of instances of boards being sued for breaches of loyalty over company business decisions. Courts seem to find lots of ways to connect the dots between "putting the interests of the corporation first" and "not signing off on dumb business decisions, like giving the CEO a huge raise in a year where the company missed its numbers".

Regardless; Apple is not going to space, at least not until it can figure out how to make money doing it.

Re: Apple Announces Plans to Initiate Dividend and Share Repurchase Program

#70

Post by eugenegamma »

programminggeek wrote: post #47

I hate to say this is a bad idea, but dividends signal to the market that you have no better way to spend your money than just giving it back to investors to spend elsewhere. Combining a stock buyback plan is smart at least because perhaps they can balance the two and counteract the dividend effect by buying up shares. In reality Apple could probably just become a private company by buying back most/all the public sh…

It isn't uncommon for management to partner up and take a company private when they are already large shareholders. In the case of Apple, this is not the case. Jobs owned more of Disney (almost 8% via the Pixar deal) than Apple on a percentage basis (less than 1%).
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