Monday, March 19, 2012

No Maggots In This Apple

by Dick Mac

Apple's chiefs, Tim Cook and Peter Oppenheimer, have called a meeting for 9:00 A.M. today to discuss plans for their hundred-billion dollar cash reserves.

Apple does not pay its shareholders a dividend, so it does not distribute its earnings to its owners.

It is common for a company to retain and reinvest its income at the beginning of its life, and as we all learned in the 1990s, not very many technology companies will be profitable in the long-term.

Apple was founded in 1976 - it is almost exactly 36 years old. It has issued stock at different times in those thirty-six years. The last dividend it paid was one-and-a-half cents ($.015) per share in 1995. So, if you had a thousand shares you got fifteen dollars, and the company has issued a 2:1 split twice since then (so if you owned a hundred shares you now had 200 shares after the first split and four hundred shares after the second. Apple stock closed Friday at $585.57. In the last year has been as low as $310.50, and as high as $600.01. It has risen about 20% in the past month! These are amazing numbers.

Today, on a per share basis, Apple is holding reserves equal to approximately $104 per share, an absolutely remarkable amount of money. It is about ninety-eight billion dollars. Extra. In the bank. Like when you open your bank statement and see the Ending Balance. $98,000,000,000.

I have never known why Apple fails to pay its shareholders a dividend, but neither have I researched it.

I have always criticized Apple's failure to pay its shareholders a dividend, especially over the past few years when their reserves expanded so much.

At today's conference, Cook and Oppenheimer may very well announce establishment of a regular dividend. One analyst estimates that the company could easily pay out $14 per share annually. That is a pretty penny, as my mother used to say. In my experience, a company that pays two dollars per share annually is a good holding. Others may disagree, and I am in no way, shape or form an expert in the stock market, nor am I qualified to give advise about trading. I just know what I've seen and what I've researched and what I have traded myself.

Even if you have no stake in the stock market, even if you have no understanding of the stock market, anybody who follows Apple's trading price today is likely to see a remarkable amount of activity, numbers that reflect billions (possibly more than a hundred billion) of dollars.

Most of the common news sites and media sites have a Finance section with live updates of market prices and activity. Check in every now and then today and see what happens.

The stock traded at 585.57 Friday. How high will it get today, and how long will it retain that value, and how will this announcement affect the market as a whole? It is already trading at $604 in pre-market activity.

I have no idea what will happen, of course; but, I suspect it is going to be a very good day for the market.

See AAPL at Google, Yahoo, or Wall Street Journal.

Apple to decide on its $98 billion cash pile

Apple to announce decision on use of cash reserves

I do not own Apple stock.

I leave you with this musical interlude:

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