Why Apple (AAPL) Could Reward Investors With a Stock Split and $25/Share Special Dividend
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Price: $444.80 +0.60%
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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We've all heard the clamoring that it's high time Apple (Nasdaq: AAPL) started paying a dividend as its cash hoard nears $100 billion. Well, we see the iPhone maker potentially taking it a step further and also announcing a STOCK SPLIT.
It's a fact that stock splits have been passé. This as tech leaders like Apple and Google (Nasdaq: GOOG) have opted to go with the Warren Buffett Berkshire Hathaway (NYSE: BKR-A) model and just let their stock prices go to infinity (BRK-A is $117,510). But even as the Oracle showed us, if there is a solid reason to split the stock then go for it. In the case of Buffett, the Burlington Northern acquisition provided the solid reason needed to split the Berkshire B-shares (NYSE: BRK-B). Well, now Apple may have its own solid reason... an invitation to join the Dow Jones Industrial Average.
There is no doubt that as the world's largest company by market cap, Apple should be in the Dow. Now there are at least three companies at risk of losing their Dow status: Kraft (NYSE: KFT) is splitting itself up; Aloca (NYSE: AA) has been a major laggard with a market cap that currently sits at just $11 billion (nearly a mid-cap stock); and Hewlett-Packard's (NYSE: HPQ) Dow listing is questionable.
Since the Dow is a price-weighted average, Apple at its current price would have too much influence on the all-important index. However, a stock split would cure this.
In addition to a stock split, a special dividend could be forthcoming.
Apple's cash hoard currently sits at $97.6 billion, or about $105 per share. However, a significant portion of Apple's cash is offshore. Apple's offshore cash totals $64 billion, or 66% of the total. This offshore portion could probably not be tapped without significant tax consequences. So this leaves $33.6 billion available to be sent out to shareholders. Apple would not likely bleed themselves dry, but could easily declare a special dividend of $25 per share - which would cost them about $23 billion. This would leave them with $10.6 billion in U.S. cash and of course the $64 billion in offshore cash.
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It's a fact that stock splits have been passé. This as tech leaders like Apple and Google (Nasdaq: GOOG) have opted to go with the Warren Buffett Berkshire Hathaway (NYSE: BKR-A) model and just let their stock prices go to infinity (BRK-A is $117,510). But even as the Oracle showed us, if there is a solid reason to split the stock then go for it. In the case of Buffett, the Burlington Northern acquisition provided the solid reason needed to split the Berkshire B-shares (NYSE: BRK-B). Well, now Apple may have its own solid reason... an invitation to join the Dow Jones Industrial Average.
There is no doubt that as the world's largest company by market cap, Apple should be in the Dow. Now there are at least three companies at risk of losing their Dow status: Kraft (NYSE: KFT) is splitting itself up; Aloca (NYSE: AA) has been a major laggard with a market cap that currently sits at just $11 billion (nearly a mid-cap stock); and Hewlett-Packard's (NYSE: HPQ) Dow listing is questionable.
Since the Dow is a price-weighted average, Apple at its current price would have too much influence on the all-important index. However, a stock split would cure this.
In addition to a stock split, a special dividend could be forthcoming.
Apple's cash hoard currently sits at $97.6 billion, or about $105 per share. However, a significant portion of Apple's cash is offshore. Apple's offshore cash totals $64 billion, or 66% of the total. This offshore portion could probably not be tapped without significant tax consequences. So this leaves $33.6 billion available to be sent out to shareholders. Apple would not likely bleed themselves dry, but could easily declare a special dividend of $25 per share - which would cost them about $23 billion. This would leave them with $10.6 billion in U.S. cash and of course the $64 billion in offshore cash.
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Warren Buffett, DividendComments
berkshire
While Berkshire hasn't split, they did create BRK/B shares a few years ago, as a lower cost way of getting into the stock.
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NO dividend!
StonehamMel on Feb 27, 2012 04:56 PMMark as Spam | Reply to this comment
Certainly not a 1-time, and certainly not $25. No need to have to repatriate money and pay taxes on it. To my way of thinking, teh stock would have to seriously plateau to need that shot in the arm. It's still growing in value the old fashioned way, I'd much rather see a split, from which it could/would quickly run up due to new investors.