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I hate to say this is a bad idea, but dividends signal to the market that you have no better way to spend your money than just giving it back to investors to sp

I hate to say this is a bad idea, but dividends signal to the market that you have no better way to spend your money than just giving it back to investors to spend elsewhere. Combining a stock buyback plan is smart at least because perhaps they can balance the two and counteract the dividend effect by buying up shares. In reality Apple could probably just become a private company by buying back most/all the public shares, but I doubt they want to do that. There are obvious PR benefits to being the "most valuable" or "most profitable" public company in the world. Also, as far as space travel and exploration, that makes no sense for Apple. Apple is not a company that invests huge in R&D projects that won't pay off for decades. It would ruin their incredible focus on what they are doing now and for the next 5 or so years. If you get too far out ahead, you build things the world isn't ready for yet or you stop executing on the here and now products and services. Apple's still got a ton of room for potential growth on phones, pc's, and tv's. There are also a whole slew of "post pc" computing interfaces and devices that haven't even been dreamed up yet. Space travel would be a distraction.

ohashi 15y ago
What are their other options other than simply accumulating cash and not being able to spend it versus a dividend. Having a war chest is nice, but at a certain point it's being wasted if you could basically buy any company on earth tomorrow if you wanted.
Me1000 15y ago
Apple's cash reserves grew about $30B last year, they're announcing that they're going to spend $45B over the course of 3 years. Assuming the current cash reserve growth continues at the same rate, I really don't think the market will look at the dividends as not knowing how to spend their money...
- astrodust 15y ago
  They know how to spend the money they have. The "problem" is that they keep making tons more.
ANH 15y ago
There are institutions, e.g. pension funds, that only invest in equities that provide a dividend. By offering a dividend, Apple is making its stock more widely available => more buyers => more shareholder value.
- unreal37 15y ago
  I laughed when I saw this in the press release. Anyone conservative enough not to buy a stock unless it provides a decent dividend would not buy Apple. Apple is not a value stock.
  - wisty 15y ago
    Wow, a downvote brigade for calling Apple a growth stock? There must be lots of MS fanboys here, or Apple fanboys who don't know that the opposite of "value stock" is "growth stock". With a P/E of 16.87, AAPL a growth stock. Or overvalued. With a P/E of 11.71, MSFT is value not growth. With a P/E of 135.1, AMZN is ... pricy.
loceng 15y ago
That's how I saw it, however I think the remaining ~$40 billion is sufficient to continue a dominant position in where they excel. Things only evolve so fast, and unless they were planning on extending into specializing into other markets, there's only so much money that can be spent in one area before you'll potentially extend yourself into other areas too much and dilute expertise/focus. Apple's brand can't dilute too much either, though there are some areas I can see them being able to excel in - but they might not have the total foresight or incentives needed to maintain dominance in those areas, as experts already exist in those fields and they'd be competing for human resources - they do have ~$40 billion left + will surely make many more billions to use however they please.
beatle 15y ago
I was right about Apple's plans to repurchase its own stock. I guess I was a little surprised by the quarterly dividend and the amount of money it plans to spend ($45b over 3 years). Then I realized Apple earned $13b profit last quarter and it's only going to grow. $15b x 4 quarters = $60b PROFIT PER YEAR. Not all of their profit will be used for the share buy back/dividend, but Apple can easily afford it and still have MORE cash (specially after you factor in cash inflow from its investing activities).
bonaldi 15y ago
"In reality Apple could probably just become a private company by buying back most/all the public shares, but I doubt they want to do that." They can't use the shareholders' money (which is what this is) to take themselves private. You can't buy something from someone with their own money. EDIT: Any of these downvoters care to explain themselves? Apple can't buy back most/all of the public shares using this pile of cash, because it belongs to Apple, which belongs to its shareholders. (Even if they could afford to do it, which they can't)
- ceejayoz 15y ago
  A public offering is the company saying "here is ownership in exchange for your money". A share buyback is the company saying "here is money in exchange for your ownership." You're getting downvoted because it doesn't make sense for a company to be able to move in one direction, but not the other.
  - bonaldi 15y ago
    Right, they can buyback, but no matter how far they go in that direction they won't end up as a private company. The shares they purchase don't transfer the ownership they imbue to the board of the company -- they are either retired, held as treasury stock or given to other shareholders. The majority shareholders remain majority shareholders of a smaller amount of stock. To think of it in a very simplified way, if the company bought back all the shares except 10 from some staunch holdout, that guy would own 100% of the shares of Apple, (and each share would have a stratospheric price). For the board/management to take control of Apple from the shareholders (which is what people mean when they talk about going private, really), they have to personally acquire more shares. They obviously can't do this with the company's money, because shares bought with that transfer to the company and either dissolve or are transferred. They have to use outside finance to do it. This is what I mean about you can't buy the company from the shareholders with their own money. (They could in the simplified world use the money to buy back the stock and grant it all to board members, but in this world there is a tonne of legislation preventing this, and if they did it to take control out of the hands of shareholders they'd be open to action.)
andylei 15y ago
> dividends signal to the market that you have no better way to spend your money than just giving it back to investors to spend elsewhere this is exactly what they're trying to signal because its true. what's wrong with that? they've been extremely profitable while not spending the $45 billion they're giving back to shareholders, and they can continue to be profitable without it. > In reality Apple could probably just become a private company by buying back most/all the public shares no it couldn't. it's market cap is 550B. it's cash reserve is 100B. more generally, a company cannot buy itself because the shareholders actually own the cash the company holds. generally, if a company has $X dollars of cash reserves, then the market cap on that company would be > $X. edit: a factor of 10
- eugenegamma 15y ago
  You're off by a factor of 10 there but the claim is still true.
- namsral 15y ago
  > the market cap on that company would be > $X. Market cap != Value assets The 550B market cap is the value of all outstanding shares of the company which is not equal to value of the combined assets like buildings and $$.
  - andylei 15y ago
    if the market cap of the company fell below the cash (net of debt obligations) of that company, the investors could liquidate the company, take the cash, and make a profit. thus, it's pretty atypically for market cap to dip below asset value, and even more atypical for market cap to dip below cash holdings.
    - namsral 15y ago
      Apple came pretty close in 1997 when they had $380 in cash and a market cap of 2.2B but their LT debt was growing fast. ~1B at the time. Source: http://www.businessweek.com/1997/34/roster34/aapl.htm http://www.businessweek.com/1997/34/roster34/aapl.htm
chalst 15y ago
Both dividends and repurchasing are ways to distribute money to shareholders, and are from the point of view of the Miller--Modigiani theorem equivalent: from this abstract viewpoint, neither should affect the value of shares. The differences are 1. Buybacks are usually more tax efficient, because with dividends, profits are realised at the point of sale; 2. Buybacks tend to be procyclical, since companies get a bargain when their shares are undervalued and overpay when they are overvalued. There is some evidence that overall, companies do not get good value for their shareholders from share buybacks. Also, many stock options have the effect that buybacks reward shareholders better than dividends. I think a mixed dividend and buyback policy is wise. Apple shouldn't be hoarding the cash, and they shouldn't make poor value acquisitions. To take themselves off the stock exchange, they would need to issue bonds valuing around $500 million, and so become a highly indebted company. This would be tricky, and it is not obvious why this would be in Apple's interest.
- tnorthcutt 15y ago
  they would need to issue bonds valuing around $500 million $500 _billion_
eugenegamma 15y ago
It isn't uncommon for management to partner up and take a company private when they are already large shareholders. In the case of Apple, this is not the case. Jobs owned more of Disney (almost 8% via the Pixar deal) than Apple on a percentage basis (less than 1%).
funkah 15y ago
> I hate to say this is a bad idea, but dividends signal to the market that you have no better way to spend your money than just giving it back to investors to spend elsewhere. The ever-present notion that the leadership team of what is now one of the largest companies in the world has no real idea what they are doing is fascinating to me. Perhaps they deserve a bit of credit.
- onemoreact 15y ago
  Getting good returns from a 100 billion dollar investment is hard. Just as an idea of scale that's enough money to more than double world wide fusion research spending for the next 30 years. Suppose they started down that path and 20 years from now started building useful and highly profitable fusion reactors that beat coal power plants. Now what if that failed. Measuring the risk / benefit curve on such an investment is hard. But, Apple could afford to fund 5 other projects on that scale without touching their cash horde. IMO, Apple starting down the dividend path is simply the only reasonable course when faced with that sort of cash flow.
  - veyron 15y ago
    > Getting good returns from a 100 billion dollar investment is hard. You don't play with 100B in the same way that you play with 100K. There are few times when a really compelling buyout opportunity emerges. And it is at those times that you want the warchest. Until then, you need to keep the dry powder. As an example, Buffett wouldn't be able to negotiate the really sweet deal with BofA last year (5B, paper profit ~ 2.8B at the onset) without the cash balance.
    - qdog 15y ago
      I don't think this hits their warchest at all. The # I heard on NPR this morning was about 2.5B/Quarter, but their profit is about 13B/quarter. Even with a 10B stock buyback plan, that's not quite a quarter of profits. Disregarding the buyback, they should still be adding to their warchest. I believe it's only when they announce a special, one-time type of dividend that it signals they don't think they will have anything to do with the money. For example, Ford basically did that a few years ago (although in retrospect 10B in electric research or something might have been wiser).
monochromatic 15y ago
The stock buyback sends exactly the same not-great message that the dividends do.
philwelch 15y ago
Without either dividends or a stock buyback plan, stocks are no more an investment than baseball cards. The point of not paying dividends is so you can reinvest your cash to increase the dividends you can pay later, and Apple's dividend is so low that they're clearly planning to reinvest the vast majority of their cash even with these dividends. I don't get the criticism that Apple has no better way to spend its money. It's been building a cash stockpile for years, so obviously they've had this "problem" for years. They're a public company that has to report the size of their cash stockpile every quarter; having a growing cash stockpile already signals they haven't found a way to somehow reinvest their cash. Paying a dividend, especially such a small one, hardly lets the cat out of the bag at this point. Furthermore, interest rates are still rock-bottom. If Apple suddenly needed a whole bunch of cash to invest, it wouldn't be at all difficult for them to borrow at much, much lower rates than their rate of return. It might be more risky and costly than simply spending a war chest, which is a good reason to keep 55 billion around (plus whatever they pull in over the next three years) while distributing the other 45 billion.
- ValG 15y ago
  Well put, I think that Apple has been working on this for months and they have a pretty good idea of what they're doing. They have worked out a very conservative amount of money to give back, and still have plenty to keep in the warchest for any R&D or M&A. With $55 billion around, they could outbid Microsoft on any acquisitions that they want (I think MSFT has close to $40 in their chest, but don't quote me on that). And before you mention that Apple is not known for acquisitions, they're also not known for buy-backs and dividends; Tim Cook might be shaking things up how Apple is doing this from a business perspective
- aero142 15y ago
  When I collect all of the Tops '88 baseball cards, I don't suddenly own the NY Yankees. Stocks have fundamental value beyond novelty.
  - maaku 15y ago
    Unless you are a significant shareholder, your "fundamental value" is lost in the noise.
ScotterC 15y ago
The key part about offering dividends is you start to attract the people who only buy stocks that pay dividends. It's a substantial category.
orky56 15y ago
It's pretty simple when you think about it. Apple has a certain hurdle rate for their projects that is extremely high, when compared to other companies. The only projects that can make it are ones that can draw on their existing resources. For them to go into something completely new would aberrate from their investment philosophy that has made them the most valuable company. On the new product front, I have more confidence in Apple knowing that they plan to think things through rather than announce something just for the sake of spending their hard earned cash.
beambot 15y ago
I disagree with your assessment of dividends vs. share buybacks. My opinion mirrors that of Mark Cuban. A few choice quotes from [1]: Dividends offer _true_ returns: They send a message to shareholders that you want them to stay as shareholders and are rewarding them for their committment to your company. Its a reminder to shareholders that the business investments you have made have actually worked and the reward is that cash can be returned to shareholders . That profits are more important to shareholders over the long term than trying to convince wall street to increase your PE [via buybacks]. Meanwhile... buybacks just perpetuate insider dilution: Companies continuously issue new shares to their managers without asking their existing shareholders. Those managers then leak that stock to the market a little at a time. It’s unlimited dilution of existing shareholders’ stakes, death by a thousand dilutive cuts. If that isn’t a scam, I don’t know what is. Individual shareholders have nothing but the chance to sell it to the next sucker. A mutual fund buys one million shares of a company with your and your coworkers’ money. You own 1 percent of the company. Six weeks later you own less, and all that money went to insiders, not to the company. And no one asked your permission, and you didn’t know you got diluted or by how much till 90 days after the fact if that soon. [1] http://blogmaverick.com/2006/07/22/executive-pay-and-stock-prices/ http://blogmaverick.com/2006/07/22/executive-pay-and-stock-p...
- karamazov 15y ago
  This is an interesting point of view, but the article you linked to misses a fundamental point of the "golden parachute" offered to CEO's: if a leading executive messes up, you want to incentivize them to come forward, not to cover up their mistake for fear of losing their jobs. Is a golden parachute ideal for this? Perhaps not, as it does introduce some strange incentives overall; but I'm not aware of anything better.
  - beambot 15y ago
    I have no idea how golden parachutes relate to a discussion of dividends vs. stock buybacks. Enlighten me?
    - 15y ago
brudgers 15y ago
>"dividends signal to the market that you have no better way to spend your money than just giving it back to investors to spend elsewhere." In Apple's case, what it signals may be a little worse - i.e. that they have given up on trying to find those better ways despite having had several years to work on it as the cash accumulated. If Apple had announced dividends a year ago, before Jobs' death, it would look like Apple had a long term vision - and there was certainly opportunity to have provided dividends. More importantly, there was opportunity to spend the money. If Apple couldn't figure out how to make a dent in $30 billion or $50 billion or $70 billion, it doesn't look like their problem has gotten any easier.
zukhan 15y ago
Relevant bit from pg's keynote: "I was talking recently to someone who knew Apple well, and I asked him if the people now running the company would be able to keep creating new things the way Apple had under Steve Jobs. His answer was simply "no." I already feared that would be the answer. I asked more to see how he'd qualify it. But he didn't qualify it at all. No, there will be no more great new stuff beyond whatever's currently in the pipeline." Looks like they probably won't be dreaming up innovative devices anyway unless a new Steve Jobs takes over.
- Schwolop 15y ago
  Despite the fact that you're writing on a website written by one of the two people whose opinions you're quoting, I really don't think extrapolating the future based on two opinions is going to fly here.

ohashi 15y ago

What are their other options other than simply accumulating cash and not being able to spend it versus a dividend. Having a war chest is nice, but at a certain point it's being wasted if you could basically buy any company on earth tomorrow if you wanted.

Me1000 15y ago

Apple's cash reserves grew about $30B last year, they're announcing that they're going to spend $45B over the course of 3 years. Assuming the current cash reserve growth continues at the same rate, I really don't think the market will look at the dividends as not knowing how to spend their money...

astrodust 15y ago
They know how to spend the money they have. The "problem" is that they keep making tons more.

ANH 15y ago

There are institutions, e.g. pension funds, that only invest in equities that provide a dividend. By offering a dividend, Apple is making its stock more widely available => more buyers => more shareholder value.

unreal37 15y ago
I laughed when I saw this in the press release. Anyone conservative enough not to buy a stock unless it provides a decent dividend would not buy Apple. Apple is not a value stock.
- wisty 15y ago
  Wow, a downvote brigade for calling Apple a growth stock? There must be lots of MS fanboys here, or Apple fanboys who don't know that the opposite of "value stock" is "growth stock". With a P/E of 16.87, AAPL a growth stock. Or overvalued. With a P/E of 11.71, MSFT is value not growth. With a P/E of 135.1, AMZN is ... pricy.

loceng 15y ago

That's how I saw it, however I think the remaining ~$40 billion is sufficient to continue a dominant position in where they excel. Things only evolve so fast, and unless they were planning on extending into specializing into other markets, there's only so much money that can be spent in one area before you'll potentially extend yourself into other areas too much and dilute expertise/focus. Apple's brand can't dilute too much either, though there are some areas I can see them being able to excel in - but they might not have the total foresight or incentives needed to maintain dominance in those areas, as experts already exist in those fields and they'd be competing for human resources - they do have ~$40 billion left + will surely make many more billions to use however they please.

beatle 15y ago

I was right about Apple's plans to repurchase its own stock. I guess I was a little surprised by the quarterly dividend and the amount of money it plans to spend ($45b over 3 years). Then I realized Apple earned $13b profit last quarter and it's only going to grow. $15b x 4 quarters = $60b PROFIT PER YEAR. Not all of their profit will be used for the share buy back/dividend, but Apple can easily afford it and still have MORE cash (specially after you factor in cash inflow from its investing activities).

bonaldi 15y ago

"In reality Apple could probably just become a private company by buying back most/all the public shares, but I doubt they want to do that." They can't use the shareholders' money (which is what this is) to take themselves private. You can't buy something from someone with their own money. EDIT: Any of these downvoters care to explain themselves? Apple can't buy back most/all of the public shares using this pile of cash, because it belongs to Apple, which belongs to its shareholders. (Even if they could afford to do it, which they can't)

ceejayoz 15y ago
A public offering is the company saying "here is ownership in exchange for your money". A share buyback is the company saying "here is money in exchange for your ownership." You're getting downvoted because it doesn't make sense for a company to be able to move in one direction, but not the other.
- bonaldi 15y ago
  Right, they can buyback, but no matter how far they go in that direction they won't end up as a private company. The shares they purchase don't transfer the ownership they imbue to the board of the company -- they are either retired, held as treasury stock or given to other shareholders. The majority shareholders remain majority shareholders of a smaller amount of stock. To think of it in a very simplified way, if the company bought back all the shares except 10 from some staunch holdout, that guy would own 100% of the shares of Apple, (and each share would have a stratospheric price). For the board/management to take control of Apple from the shareholders (which is what people mean when they talk about going private, really), they have to personally acquire more shares. They obviously can't do this with the company's money, because shares bought with that transfer to the company and either dissolve or are transferred. They have to use outside finance to do it. This is what I mean about you can't buy the company from the shareholders with their own money. (They could in the simplified world use the money to buy back the stock and grant it all to board members, but in this world there is a tonne of legislation preventing this, and if they did it to take control out of the hands of shareholders they'd be open to action.)

andylei 15y ago

> dividends signal to the market that you have no better way to spend your money than just giving it back to investors to spend elsewhere this is exactly what they're trying to signal because its true. what's wrong with that? they've been extremely profitable while not spending the $45 billion they're giving back to shareholders, and they can continue to be profitable without it. > In reality Apple could probably just become a private company by buying back most/all the public shares no it couldn't. it's market cap is 550B. it's cash reserve is 100B. more generally, a company cannot buy itself because the shareholders actually own the cash the company holds. generally, if a company has $X dollars of cash reserves, then the market cap on that company would be > $X. edit: a factor of 10

eugenegamma 15y ago
You're off by a factor of 10 there but the claim is still true.
namsral 15y ago
> the market cap on that company would be > $X. Market cap != Value assets The 550B market cap is the value of all outstanding shares of the company which is not equal to value of the combined assets like buildings and $$.
- andylei 15y ago
  if the market cap of the company fell below the cash (net of debt obligations) of that company, the investors could liquidate the company, take the cash, and make a profit. thus, it's pretty atypically for market cap to dip below asset value, and even more atypical for market cap to dip below cash holdings.
  - namsral 15y ago
    Apple came pretty close in 1997 when they had $380 in cash and a market cap of 2.2B but their LT debt was growing fast. ~1B at the time. Source: http://www.businessweek.com/1997/34/roster34/aapl.htm http://www.businessweek.com/1997/34/roster34/aapl.htm

chalst 15y ago

Both dividends and repurchasing are ways to distribute money to shareholders, and are from the point of view of the Miller--Modigiani theorem equivalent: from this abstract viewpoint, neither should affect the value of shares. The differences are 1. Buybacks are usually more tax efficient, because with dividends, profits are realised at the point of sale; 2. Buybacks tend to be procyclical, since companies get a bargain when their shares are undervalued and overpay when they are overvalued. There is some evidence that overall, companies do not get good value for their shareholders from share buybacks. Also, many stock options have the effect that buybacks reward shareholders better than dividends. I think a mixed dividend and buyback policy is wise. Apple shouldn't be hoarding the cash, and they shouldn't make poor value acquisitions. To take themselves off the stock exchange, they would need to issue bonds valuing around $500 million, and so become a highly indebted company. This would be tricky, and it is not obvious why this would be in Apple's interest.

tnorthcutt 15y ago
they would need to issue bonds valuing around $500 million $500 _billion_

eugenegamma 15y ago

It isn't uncommon for management to partner up and take a company private when they are already large shareholders. In the case of Apple, this is not the case. Jobs owned more of Disney (almost 8% via the Pixar deal) than Apple on a percentage basis (less than 1%).

funkah 15y ago

> I hate to say this is a bad idea, but dividends signal to the market that you have no better way to spend your money than just giving it back to investors to spend elsewhere. The ever-present notion that the leadership team of what is now one of the largest companies in the world has no real idea what they are doing is fascinating to me. Perhaps they deserve a bit of credit.

onemoreact 15y ago
Getting good returns from a 100 billion dollar investment is hard. Just as an idea of scale that's enough money to more than double world wide fusion research spending for the next 30 years. Suppose they started down that path and 20 years from now started building useful and highly profitable fusion reactors that beat coal power plants. Now what if that failed. Measuring the risk / benefit curve on such an investment is hard. But, Apple could afford to fund 5 other projects on that scale without touching their cash horde. IMO, Apple starting down the dividend path is simply the only reasonable course when faced with that sort of cash flow.
- veyron 15y ago
  > Getting good returns from a 100 billion dollar investment is hard. You don't play with 100B in the same way that you play with 100K. There are few times when a really compelling buyout opportunity emerges. And it is at those times that you want the warchest. Until then, you need to keep the dry powder. As an example, Buffett wouldn't be able to negotiate the really sweet deal with BofA last year (5B, paper profit ~ 2.8B at the onset) without the cash balance.
  - qdog 15y ago
    I don't think this hits their warchest at all. The # I heard on NPR this morning was about 2.5B/Quarter, but their profit is about 13B/quarter. Even with a 10B stock buyback plan, that's not quite a quarter of profits. Disregarding the buyback, they should still be adding to their warchest. I believe it's only when they announce a special, one-time type of dividend that it signals they don't think they will have anything to do with the money. For example, Ford basically did that a few years ago (although in retrospect 10B in electric research or something might have been wiser).

monochromatic 15y ago

The stock buyback sends exactly the same not-great message that the dividends do.

philwelch 15y ago

Without either dividends or a stock buyback plan, stocks are no more an investment than baseball cards. The point of not paying dividends is so you can reinvest your cash to increase the dividends you can pay later, and Apple's dividend is so low that they're clearly planning to reinvest the vast majority of their cash even with these dividends. I don't get the criticism that Apple has no better way to spend its money. It's been building a cash stockpile for years, so obviously they've had this "problem" for years. They're a public company that has to report the size of their cash stockpile every quarter; having a growing cash stockpile already signals they haven't found a way to somehow reinvest their cash. Paying a dividend, especially such a small one, hardly lets the cat out of the bag at this point. Furthermore, interest rates are still rock-bottom. If Apple suddenly needed a whole bunch of cash to invest, it wouldn't be at all difficult for them to borrow at much, much lower rates than their rate of return. It might be more risky and costly than simply spending a war chest, which is a good reason to keep 55 billion around (plus whatever they pull in over the next three years) while distributing the other 45 billion.

ValG 15y ago
Well put, I think that Apple has been working on this for months and they have a pretty good idea of what they're doing. They have worked out a very conservative amount of money to give back, and still have plenty to keep in the warchest for any R&D or M&A. With $55 billion around, they could outbid Microsoft on any acquisitions that they want (I think MSFT has close to $40 in their chest, but don't quote me on that). And before you mention that Apple is not known for acquisitions, they're also not known for buy-backs and dividends; Tim Cook might be shaking things up how Apple is doing this from a business perspective
aero142 15y ago
When I collect all of the Tops '88 baseball cards, I don't suddenly own the NY Yankees. Stocks have fundamental value beyond novelty.
- maaku 15y ago
  Unless you are a significant shareholder, your "fundamental value" is lost in the noise.

ScotterC 15y ago

The key part about offering dividends is you start to attract the people who only buy stocks that pay dividends. It's a substantial category.

orky56 15y ago

It's pretty simple when you think about it. Apple has a certain hurdle rate for their projects that is extremely high, when compared to other companies. The only projects that can make it are ones that can draw on their existing resources. For them to go into something completely new would aberrate from their investment philosophy that has made them the most valuable company. On the new product front, I have more confidence in Apple knowing that they plan to think things through rather than announce something just for the sake of spending their hard earned cash.

beambot 15y ago

I disagree with your assessment of dividends vs. share buybacks. My opinion mirrors that of Mark Cuban. A few choice quotes from [1]: Dividends offer _true_ returns: They send a message to shareholders that you want them to stay as shareholders and are rewarding them for their committment to your company. Its a reminder to shareholders that the business investments you have made have actually worked and the reward is that cash can be returned to shareholders . That profits are more important to shareholders over the long term than trying to convince wall street to increase your PE [via buybacks]. Meanwhile... buybacks just perpetuate insider dilution: Companies continuously issue new shares to their managers without asking their existing shareholders. Those managers then leak that stock to the market a little at a time. It’s unlimited dilution of existing shareholders’ stakes, death by a thousand dilutive cuts. If that isn’t a scam, I don’t know what is. Individual shareholders have nothing but the chance to sell it to the next sucker. A mutual fund buys one million shares of a company with your and your coworkers’ money. You own 1 percent of the company. Six weeks later you own less, and all that money went to insiders, not to the company. And no one asked your permission, and you didn’t know you got diluted or by how much till 90 days after the fact if that soon. [1] http://blogmaverick.com/2006/07/22/executive-pay-and-stock-prices/ http://blogmaverick.com/2006/07/22/executive-pay-and-stock-p...

karamazov 15y ago
This is an interesting point of view, but the article you linked to misses a fundamental point of the "golden parachute" offered to CEO's: if a leading executive messes up, you want to incentivize them to come forward, not to cover up their mistake for fear of losing their jobs. Is a golden parachute ideal for this? Perhaps not, as it does introduce some strange incentives overall; but I'm not aware of anything better.
- beambot 15y ago
  I have no idea how golden parachutes relate to a discussion of dividends vs. stock buybacks. Enlighten me?
  - 15y ago

brudgers 15y ago

>"dividends signal to the market that you have no better way to spend your money than just giving it back to investors to spend elsewhere." In Apple's case, what it signals may be a little worse - i.e. that they have given up on trying to find those better ways despite having had several years to work on it as the cash accumulated. If Apple had announced dividends a year ago, before Jobs' death, it would look like Apple had a long term vision - and there was certainly opportunity to have provided dividends. More importantly, there was opportunity to spend the money. If Apple couldn't figure out how to make a dent in $30 billion or $50 billion or $70 billion, it doesn't look like their problem has gotten any easier.

zukhan 15y ago

Relevant bit from pg's keynote: "I was talking recently to someone who knew Apple well, and I asked him if the people now running the company would be able to keep creating new things the way Apple had under Steve Jobs. His answer was simply "no." I already feared that would be the answer. I asked more to see how he'd qualify it. But he didn't qualify it at all. No, there will be no more great new stuff beyond whatever's currently in the pipeline." Looks like they probably won't be dreaming up innovative devices anyway unless a new Steve Jobs takes over.

Schwolop 15y ago
Despite the fact that you're writing on a website written by one of the two people whose opinions you're quoting, I really don't think extrapolating the future based on two opinions is going to fly here.