February 24, 2012
Yesterday, Apple held its annual shareholder meeting. One of the hot topics discussed in this meeting was Apple's massive, almost $100 billion, cash reserve. Chief Executive Officer Tim Cook reiterated that the tech giant is still exploring its options for putting this cash to work and that paying a regular dividend is not out of the question.
Apple hasn't paid a dividend since 1995 when Steve Jobs returned to the company and transformed it into one of the largest companies in the world. Jobs was adamant about retaining profits rather than returning them to shareholders in the form of a cash dividend. Cook, however, is not opposed to the idea, though no decision has been made as of yet.
The implications of an Apple dividend are substantial. The change would attract private investors who typically accumulate shares in dividend paying companies. An even larger implication is the effect it would have on mutual fund managers. Most mutual fund managers operate under a stringent investment policy. While they may find Apple to be an attractive investment, they may not be allowed to hold it within their fund if, for instance, the fund's goal is to invest in income generating stocks. The inclusion of a dividend could cause a very large amount of accumulation as certain fund managers might finally be able to put Apple on their allowable list.
Sam DiNorma
(This article contains the current opinions of the author but not necessarily those of Brighton Securities Corp. The author's opinions are subject to change without notice. This blog post is for informational purposes only. Forecasts, estimates, and certain information contained herein should not be considered as investment advice or a recommendation of any particular security, strategy or investment product. References to specific securities and their issuers are for illustrative purposes only and are not intended and should not be interpreted as recommendations to purchase or sell such securities).