Rumors are swirling that Apple (NASDAQ: AAPL) may announce some sort of a hefty dividend. This has been long awaited by investors are are trying to get some of the cash on Apple's balance sheet. Others have been saying that a dividend would be terrible for the company as it would signal a sign of slowing growth.
However Apple has over $80 billion of cash on its balance sheet. This number grows dramatically every quarter due to Apple`s string sales and net income. However the portion of cash that is simply sitting in the bank, or in bonds is earning a very low interest rate and would clearly be more beneficial in the pockets of individual shareholders.
Making the decision to declare a dividend though has historically signalled to investors that the stock is entering a slow-growth phase. Stock prices usually fall when the dividend is declared, as the rapid growth period is thought to be over. This was seen in technology companies such as Microsoft (NASDAQ: MSFT) and Intel (NASDAQ: INTC). However it seems that Apple is a different animal. The company has so much cash on hand that it can pay a dividend, and still have wads of cash left over to defend itself from the competition, and continue to grow at a rapid pace. Apple can continue to fund its innovation and to expand worldwide with a mere fraction of the excess cash that it is holding. The company still has a low market share in laptops and mobile phones, yet it makes the highest income. growing the market share slightly can have a high increase in income.
Bottom Line: If the company decides to pay a dividend, it will definitely have enough cash on hand to continue to fund its speedy growth and innovation. There is no sense holding too much excess cash on hand, as it is slowly losing value over time. Paying the cash out should be viewed as a value-added move to shareholders.
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