Apple (AAPL) Needs to Reward Shareholders With a Dividend to Keep the Ball Rolling
Tweet
Share
E-mail
Get Alerts AAPL Hot Sheet
Price: $166.90 +0.64%
Overall Analyst Rating:
NEUTRAL (= Flat)
Dividend Yield: 0.5%
Revenue Growth %: -4.3%
Overall Analyst Rating:
NEUTRAL (= Flat)
Dividend Yield: 0.5%
Revenue Growth %: -4.3%
Join SI Premium – FREE
Apple (Nasdaq: AAPL) is one of only three of the top twenty five companies in the S&P 500 that does not pay a dividend to its shareholders. The other two are Google (Nasdaq: GOOG) and Berkshire Hathaway (Nasdaq: BRK-A).
If Apple returned 50 percent of its free cash flow to shareholders annually, the company would be able to offer investors a 5 percent annual return, while still increasing its cash reserves by $20 billion per year, reports Barron's. A 5 percent return would represent the biggest yield within the top 25 largest U.S. tech companies.
Barron's believes a gesture, such as the initiation of a dividend, is needed to attract additional investors.
Following a study of 725 U.S. large-cap mutual funds with over a billion dollars in assets under management, Barron's notes 6.9 percent of the fund's assets are invested in Apple shares. Funds are beginning to experience some scrutiny on how much exposure is safe to have with Apple, although shares have risen roughly 18 percent year to date.
A dividend would also drive up the stock's price as value investors would begin to be more attracted to the shares.
Barron's states that only 0.4 percent of total assets among the largest U.S. value funds is made up of shares of Apple. Currently, shares only trade at eleven times this year's earnings, although Apple is on track to report a 26 percent increase in profits for the year. The company had a cash balance of $81.6 billion at the end of last quarter and is expected to grow that balance to $100 billion by March of 2012.
Analysts believe large amounts of cash may more likely result in management making a bad acquisition. Analysts also note the management is offering its investors minimal return with such a large amount of cash in the form of fixed income.
A dividend may be announced as soon as April of 2012, Barron's speculates.
If Apple returned 50 percent of its free cash flow to shareholders annually, the company would be able to offer investors a 5 percent annual return, while still increasing its cash reserves by $20 billion per year, reports Barron's. A 5 percent return would represent the biggest yield within the top 25 largest U.S. tech companies.
Barron's believes a gesture, such as the initiation of a dividend, is needed to attract additional investors.
Following a study of 725 U.S. large-cap mutual funds with over a billion dollars in assets under management, Barron's notes 6.9 percent of the fund's assets are invested in Apple shares. Funds are beginning to experience some scrutiny on how much exposure is safe to have with Apple, although shares have risen roughly 18 percent year to date.
A dividend would also drive up the stock's price as value investors would begin to be more attracted to the shares.
Barron's states that only 0.4 percent of total assets among the largest U.S. value funds is made up of shares of Apple. Currently, shares only trade at eleven times this year's earnings, although Apple is on track to report a 26 percent increase in profits for the year. The company had a cash balance of $81.6 billion at the end of last quarter and is expected to grow that balance to $100 billion by March of 2012.
Analysts believe large amounts of cash may more likely result in management making a bad acquisition. Analysts also note the management is offering its investors minimal return with such a large amount of cash in the form of fixed income.
A dividend may be announced as soon as April of 2012, Barron's speculates.
Serious News for Serious Traders! Try StreetInsider.com Premium Free!
You May Also Be Interested In
- Tesla touts acceleration of new models, but Q1 results fall short of estimates
- KKR Real Estate Finance Trust (KREF) Tops Q1 EPS by 4c
- Intel to report later this week, but analysts flag weakness in chipmaking unit
Create E-mail Alert Related Categories
Dividends, Insiders' BlogRelated Entities
Warren Buffett, Standard & Poor's, Barron's, Dividend, EarningsSign up for StreetInsider Free!
Receive full access to all new and archived articles, unlimited portfolio tracking, e-mail alerts, custom newswires and RSS feeds - and more!
