Apple (AAPL) Shouldn't Split the Stock or Announce a Massive Buyback, But They Should Do This...
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Price: $441.99 +2.01%
Overall Analyst Rating:
BUY (= Flat)
Dividend Yield: 2.7%
EPS Growth %: -18.0%
Overall Analyst Rating:
BUY (= Flat)
Dividend Yield: 2.7%
EPS Growth %: -18.0%
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Much has been said about the dramatic 26 percent sell-off in Apple Inc. (NASDAQ: AAPL) since the September highs. The action has led various market watchers to call on the company to stop the free-fall with a stock split or a massive stock buyback.
First on the stock split. While stock splits often bring excitement, they change nothing fundamentally. In the case of a 2-for-1 split, your 2 shares would represent the same amount of the company your prior 1 share did. In fact, CEO Tim Cook has already been quoted in the past as saying stock splits "do nothing." Not only that, the time to split the stock would have been at $700, not $200 cheaper. Heck, that's already in effect a stock split, although holders didn't get any more shares! If Apple were to announce a stock split at this point it would reek of desperation.
On the stock buyback. While Apple is clearly cheap on various metrics, no management should be in the business of stock timing. If shares get down to book or cash value then sure buy all you can. But getting into the business of stock speculation could only end up hurting shareholders. Apple already has a $10 billion share repurchase plan in place, although it is unclear how much of this, if any, they have used.
One shareholder friendly move that Apple should embark on is the raising of its dividend. One of the most beautiful things about the recent stock slide is that the dividend yield has surged above 2 percent, based on the current annual payout of $10.60/share. Apple has plenty of room to raise the dividend and they should. Raising the annual dividend to $20 per share would certainly light a fire under the stock, for the right reasons.
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First on the stock split. While stock splits often bring excitement, they change nothing fundamentally. In the case of a 2-for-1 split, your 2 shares would represent the same amount of the company your prior 1 share did. In fact, CEO Tim Cook has already been quoted in the past as saying stock splits "do nothing." Not only that, the time to split the stock would have been at $700, not $200 cheaper. Heck, that's already in effect a stock split, although holders didn't get any more shares! If Apple were to announce a stock split at this point it would reek of desperation.
On the stock buyback. While Apple is clearly cheap on various metrics, no management should be in the business of stock timing. If shares get down to book or cash value then sure buy all you can. But getting into the business of stock speculation could only end up hurting shareholders. Apple already has a $10 billion share repurchase plan in place, although it is unclear how much of this, if any, they have used.
One shareholder friendly move that Apple should embark on is the raising of its dividend. One of the most beautiful things about the recent stock slide is that the dividend yield has surged above 2 percent, based on the current annual payout of $10.60/share. Apple has plenty of room to raise the dividend and they should. Raising the annual dividend to $20 per share would certainly light a fire under the stock, for the right reasons.
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Let's go back to NO dividend please...
SuzieQ on Nov 18, 2012 07:33 PMMark as Spam | Reply to this comment
I'm sure shareholders would rather have their $200/share back versus another few bucks of dividends. I would rather Apple keep the money, as they can put it to better use in growing shareholder value. Enough $200 haircuts, and they can take the company private.