Apple Announces Plans to Initiate Dividend and Share Repurchase Program • Hacker News Board

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

#81

Post by onemoreact » Mon, Mar 19, 2012, 3:04 PM UTC

funkah wrote: post #71

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 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. The ever-present notion that the leadership team of what is now one of the largest companies in the world has no real idea what they are doing is fascinating to me. Perhaps they deserve a bit of credit.

Getting good returns from a 100 billion dollar investment is hard. Just as an idea of scale that's enough money to more than double world wide fusion research spending for the next 30 years. Suppose they started down that path and 20 years from now started building useful and highly profitable fusion reactors that beat coal power plants. Now what if that failed. Measuring the risk / benefit curve on such an investment is hard. But, Apple could afford to fund 5 other projects on that scale without touching their cash horde.

IMO, Apple starting down the dividend path is simply the only reasonable course when faced with that sort of cash flow.

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

#82

Post by wisty » Mon, Mar 19, 2012, 3:06 PM UTC

unreal37 wrote: post #77

ANH wrote: post #55

Earlier quoted context omitted.

There are institutions, e.g. pension funds, that only invest in equities that provide a dividend. By offering a dividend, Apple is making its stock more widely available => more buyers => more shareholder value.

I laughed when I saw this in the press release. Anyone conservative enough not to buy a stock unless it provides a decent dividend would not buy Apple. Apple is not a value stock.

Wow, a downvote brigade for calling Apple a growth stock? There must be lots of MS fanboys here, or Apple fanboys who don't know that the opposite of "value stock" is "growth stock".

With a P/E of 16.87, AAPL a growth stock. Or overvalued. With a P/E of 11.71, MSFT is value not growth. With a P/E of 135.1, AMZN is ... pricy.

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

#83

Post by namsral » Mon, Mar 19, 2012, 3:08 PM UTC

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…

> the market cap on that company would be > $X.

Market cap != Value assets

The 550B market cap is the value of all outstanding shares of the company which is not equal to value of the combined assets like buildings and $$.

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

#84

Post by andylei » Mon, Mar 19, 2012, 3:16 PM UTC

namsral wrote: post #83

andylei wrote: post #64

Earlier quoted context omitted.

> 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…

> the market cap on that company would be > $X. Market cap != Value assets The 550B market cap is the value of all outstanding shares of the company which is not equal to value of the combined assets like buildings and $$.

if the market cap of the company fell below the cash (net of debt obligations) of that company, the investors could liquidate the company, take the cash, and make a profit. thus, it's pretty atypically for market cap to dip below asset value, and even more atypical for market cap to dip below cash holdings.

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

#85

Post by veyron » Mon, Mar 19, 2012, 3:17 PM UTC

nikcub wrote: post #40

rmc wrote: post #26

Why are Apple doing this? I don't know much about stock and companies with money, but people on this thread are implying that Apple must get rid of it's cash? Why? Surely cash is good? Safety net? What if the sales plummet you don't go out of business, etc. etc.?

the Wall St logic is that since Apple are not spending the cash and it is just sitting there and earning almost nothing then you are better off giving it back to investors to invest for themselves (buying t-bills isn't hard, we can do that ourselves). the century old idea of stocks (and what buffet et al subscribe to) is about generating a yield from profits. the secondary effect is that now those types of investors…

They were pressured by wall street to actually do something with the money.

I for one would have liked to see apple carry the cash balance. Sure they aren't making much from the cash, but I'm pretty sure there are better uses of the money. For example, why not buy a few suppliers?

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

#86

Post by glenra » Mon, Mar 19, 2012, 3:18 PM UTC

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 been successful so far with a very careful strategy: they focus on just a few markets at a time, only enter new markets if they have a big competitive advantage in those markets and only release new products if those products are a big improvement on the prior status quo.

If they were to spread management attention more thinly by starting separate divisions to do the sorts of entirely unrelated things you describe, Apple could easily turn into IBM or Microsoft. At its heart, Apple is a small company. The main way Apple helps all those other industries is by training engineers to think in the Apple way who then go off and found start-ups of their own. And by making lots of millionaires to fund those start-ups.

(Apple's also investing in some of those industries as a customer. For instance, they invest in "green energy" by buying solar panels for its new HQ building.)

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

#87

Post by latch » Mon, Mar 19, 2012, 3:19 PM UTC

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…

Not to mention the inherit problem of trying to corner a market. It would be hard to buy the shares back without prices being driven up....https://en.wikipedia.org/wiki/Silver_Thursday

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

#88

Post by smackfu » Mon, Mar 19, 2012, 3:24 PM UTC

InclinedPlane wrote: post #50

nikcub wrote: post #19

Earlier quoted context omitted.

thats right, forgot about that special dividend. they also announced a huge buyback at that time as well. here it is http://www.microsoft.com/presspass/press/2004/jul04/07-20boa... I think their stock has been pretty flat since, and the dividend increases haven't done much to stimulate the price. Edit: btw, is this you in the MF thread about it? :) http://ask.metafilter.com/11657/Why-Will-Dividend-Make-Micro...

The dividend and buyback has been an attempt to mitigate the stock price flatness problem. It's a very serious issue for the company, especially at the employee level (what's the use of stock grants and options if they have no value beyond mere cash payments?

On the other hand, employee options are actually hurt by dividends since the option holder takes the price hit on their outstanding options, but does not receive the dividend value.

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

#89

Post by veyron » Mon, Mar 19, 2012, 3:29 PM UTC

onemoreact wrote: post #81

funkah wrote: post #71

Earlier quoted context omitted.

> 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. The ever-present notion that the leadership team of what is now one of the largest companies in the world has no real idea what they are doing is fascinating to me. Perhaps they deserve a bit of credit.

Getting good returns from a 100 billion dollar investment is hard . Just as an idea of scale that's enough money to more than double world wide fusion research spending for the next 30 years. Suppose they started down that path and 20 years from now started building useful and highly profitable fusion reactors that beat coal power plants. Now what if that failed. Measuring the risk / benefit curve on such an investme…

> Getting good returns from a 100 billion dollar investment is hard.

You don't play with 100B in the same way that you play with 100K.

There are few times when a really compelling buyout opportunity emerges. And it is at those times that you want the warchest. Until then, you need to keep the dry powder.

As an example, Buffett wouldn't be able to negotiate the really sweet deal with BofA last year (5B, paper profit ~ 2.8B at the onset) without the cash balance.

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

#90

Post by WettowelReactor » Mon, Mar 19, 2012, 3:32 PM UTC

brown9-2 wrote: post #36

rmc wrote: post #26

Why are Apple doing this? I don't know much about stock and companies with money, but people on this thread are implying that Apple must get rid of it's cash? Why? Surely cash is good? Safety net? What if the sales plummet you don't go out of business, etc. etc.?

Apple believes that it can offer a better return on that cash by giving some portion of it back to it's owners/shareholders than by continuing to hold it all in reserve. That's really all this is about.

Thank you. This is the first time I have seen dividend explained in a matter that makes sense.