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Apple (AAPL) CashRich Company Makes Analysts Guess What Next?
August 15, 2010, 1:37 AMIncidentally Apple Inc. (NASDAQGS: AAPL) has more cash lying than any other Company aggregating $45.8 billion as on 30th June, which can mean $49 per share. It makes shareholders and analysts guess what shall be next move of the company. One of the possible ways is to pay dividend to its shareholders.
It is lot of cash just lying not being utilized by the company if the following details are considered:
• The net cash with Apple is much more than any other listed company in the US.
• The cash position is bigger than the market cap of all except 49 of the companies among the
S&P 500.
• This net cash shall be increasing by $20 billion more during FY 2011 according the market
estimation.
Apple besides by its very efficient and responsible management of the company has been taking highly focused and right steps enabling the company to enhance the value of the company in a great way for its shareholders during the last 5 years period.
Considering all the so good is alright, so far. At this stage the shareholders feel a bit frustrated that so far the company has not declared any dividend, which the company is in position to do, considering $46 billion unutilized cash available with the company.
It seems that the company is not willing to distribute the Dividend and it is also not in a position to convey to the shareholders about company’s future plans for utilizing the cash they are retaining. Apple’s Board, whenever it meets must decide, what they are deciding to do with the funds.
The stage achieved requires that the company now returns the excess cash lying with it as dividend, because this much cash accumulated with the company, is not needed to run the operations of the company, since there are no known plans for any acquisition.
Apple is in a position to get a yield of 0.76% on the cash lying with it, which in other words is destruction of the value of the cash, which can be utilized in other opportunities with better yields, Like buying back of the shares.
Presently the shareholders are in a state of fear regarding loss of value by any acquisition. This fear can be alleviated by return of excess cash as dividend to the shareholders.
Declaring of dividend shall encourage more investor’s investment in the company.
The company can exercise any of the three courses like paying one time dividend, start paying regular dividend or buying back of the shares out of which payment of regular dividend is the most satisfactory action in the interest of both company and its share holders.
A combination of two courses can be to use $30 billion in buy back shares and give 4% dividend, by doing so the company shall be using up around 70% of the cash lying with it and still be having 30% of $46 billion cash with the company. This shall cause 13% reduction in shares and also shall boost 13% EPS of the share.
Incidentally the AAPL share is 3.22% down quoted at $249.10.
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