Neil Hughes
Analyst Mark Moskowitz with J.P. Morgan said in a note to investors on Friday that he expects that Apple will indeed pay a dividend in the near future. Given the company's current $100 billion in cash, he even thinks this could be a generous dividend of between 3 and 4 percent.
But he believes the creation of a dividend could create a "scarcity issue" for AAPL shares, as the iPhone maker's stock is currently under-owned by institutions. Even though Apple is the largest stock in the Russell 1000, 40 percent of mutual funds indexed to the Russell 1000 do not have Apple as a top 10 holding.
In addition, Moskowitz noted that 77 percent of Apple's shares are held institutionally. That's lower than the average among companies in the S&P 500, and it's also lower than the average technology sector holding.
"In other words, Apple is substantially under-owned by major investment funds, particularly those focused on income, i.e., dividend," he wrote. "If and when Apple were to announce a dividend, we expect the scarcity issue to result as investment funds move to build meaningful position."
A scarcity of AAPL shares could push the company's valuation multiples in the range of 13 to 15 times forward price-to-earnings ratio. That would address what he said have been the company's recently depressed valuation multiple of about 10 to 12 times.
A higher price-to-earnings multiple with Apple's continued earnings growth could lead to a "major appreciation trajectory" for the value of Apple stock, Moskowitz believes.
The growth trajectory of Apple's cash hoard, via Asymco.
The comments come less than a day after investors pressed Apple at its annual shareholder meeting on issuing a dividend. Calls for a cash dividend have increased since Apple's cash hoard has swelled to $100 billion.
Apple Chief Executive Tim Cook told investors that the company continues to think "very deeply" about what to do with its cash. The company has continued to make strategic investments to bolster its supply chain and also enhance its current product offerings, as it did with the $50 million purchase of App Store search engine Chomp, revealed on Thursday.
"My message there is that the board and the management are thinking about this very deeply... and we will do what we think is in the best interest of shareholders," Cook said.
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137 Comments
So Apple has so much money it can't make more money of out it so it will give it back to the shareholders. Looks like it's time to sell.
It's been a decade since Apple needed cash in the bank to finance operations. Money coming in is sufficient.
What Apple should do is a one-time special dividend using 50 billion. That will amount to about $5 per share, and if they do it soon, the tax hit on shareholders will be small. That will leave them 50B in the bank which grows by around 10 per quarter, and in another year they can do it again if the tax environment remains reasonable.
So Apple has so much money it can't make more money of out it so it will give it back to the shareholders. Looks like it's time to sell.
That makes no sense. Apple will make close to $50 EPS or over $50 billion in profit this year. They are also growing earnings over 100% year over year. Apple has FAR more money than they need and the cash is generated rapidly. The point of a publicly traded business is to return value to its owners, the shareholders. This is a good thing. It points to apples strength not weakness.
It's been a decade since Apple needed cash in the bank to finance operations. Money coming in is sufficient.
What Apple should do is a one-time special dividend using 50 billion. That will amount to about $5 per share, and if they do it soon, the tax hit on shareholders will be small. That will leave them 50B in the bank which grows by around 10 per quarter, and in another year they can do it again if the tax environment remains reasonable.
That would be a huge mistake has it doesnt address at all the problem of allowing more funds to buy Apple. Not to mention that most of the cash is not available since its off shore.
And 50 billions means 50$ per share, not 5$.
Apple have explicitly said they will not be issuing a dividend at this time, yet some analysts persist with talk of dividends. Do they think that is all Apple can do with the money? It just goes to show what a limited imagination so-called analyst, Mark Moskowitz, has.