An Apple (AAPL) Dividend? 'Bah Humbug,' Investors Say

Apple (Nasdaq: AAPL) investors who read the news over the past few days and assumed a dividend announcement from the iPhone and iPad maker is a certainty sometime next year: not so fast! Not only is this not a foregone conclusion, some Apple investors don't want to see this happen at all.

You see, initiating a dividend policy is nearly an admission by the company "our best days of growth are behind us." See: Microsoft (Nasdaq: MSFT) circa 2003.

With its swelling $80+ billion and growing cash hoard, there have been questions for years on what the company will do with the cash. The late Steve Jobs wanted to keep it for a rainy day. New CEO Tim Cook on the other hand said he is "not religious" about keeping it. The "cash question", he said, is a Board matter.

Apple's Board has been going through some changes with the death of Mr. Jobs. Art Levinson was appointed Chairman and Walt Disney's (NYSE: DIS) CEO Bog Iger was added as a director. This new Board could be more open to distributing Apple's cash, although this is just speculation.

A recent Barron's article noted Apple could pay half its free cash flow in an annual dividend and be able to offer investors a fat 5 percent annual return. Such a dividend would rival Intel's (Nasdaq: INTC) 3.6 percent yield and Microsoft which pays a 3.1 percent yield. While such a fat dividend would be unprecedented, it’s not impossible. Analysts see a much smaller dividend to start though -- maybe in the 1 percent range.

While Wall Street analysts have been clamoring for a dividend from Apple, some investors want Apple to spend the money other ways. Here are some other ways Apple could spend the cash:

1. Defend the company's market share by buying intellectual property like mobile patents. RIM (Nasdaq: RIMM) or InterDigital, Inc. (Nasdaq: IDCC) could be good fits for patents.

2. Expand the current entertainment offering by buying Netflix, Inc. (Nasdaq: NFLX) and/or Pandora Media, Inc. (NYSE: P).

3. Apple could go head first into social media by buying Facebook, Twitter, or Groupon (Nasdaq: GRPN).

4. While a long shot, the company could buy Iger's Walt Disney (NYSE: DIS) outright, which has a market cap of $65 billion.

While some Apple investors don't want to see a dividend, they overwhelmingly want one thing: A STOCK SPLIT.

Although a stock split does nothing fundamentally for the stock, if Apple shares were split, let's say 4:1, the stock price would drop to a level where more retail investors may be comfortable buying in. Stock splits seem to work on a psychological level. "Hey I can Buy 10 share of AAPL for a $1,000… Let's do it!” This versus "I can buy 2.5 shares of AAPL for $1,000... aw forget it." While not the same effect on institutional investors, they would be buying too just from the euphoria a stock split can create.

So the next time you read a rumor Apple will announce a dividend next year, don't assume it's a given. At least not until you hear official word from the company. If a dividend is coming, the CEO will likely telegraph such a move months in advance. To date, there has been nothing of the sort.

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