Rumors have been circulating that Apple Inc. (NASDAQ:AAPL) is likely to release a once off special dividend before the end of 2012. The impetus behind the speculated move, according to those spreading the rumors, is the dispersion of the firm’s large cash holdings, and the recovery of the firm’s share price.
Several companies have announced special dividends to their shareholders in anticipation of higher tax rates in 2013. Those tax increases would be particularly steep if the government fails to negotiate a budget deal, and the so called fiscal cliff automatic cuts come into effect.
Carlson Capital's Double Black Diamond fund added 3.09% net of fees in the second quarter of 2021. Following this performance, the fund delivered a profit of 5.3% net of fees for the first half. Q2 2021 hedge fund letters, conferences and more According to a copy of the fund's half-year update, which ValueWalk has been Read More
2012 was the first year in which Apple dispersed a dividend since the mid 1990s. The company’s founder , Steve Jobs, was known for his opposition to shareholder dividends, and the announcement of the payment was seen as a break in the company’s principles.
Just because Apple Inc. (NASDAQ:AAPL) has moved an inch, doesn’t mean the firm will move a mile. The announcement of a special dividend would do little to help the company’s fortunes, and there are several reasons why.
Apple Inc. (NASDAQ:AAPL) sits on a behemoth cash pile, estimated to be more than $100 billion. The company is holding on to much of that cash overseas, because in order to repatriate the money they would have to pay a large chunk of it in tax to the federal government.
If Apple Inc. (NASDAQ:AAPL) were to pay a special dividend, it would still have to pay exorbitant sums in tax. The company, having kept its cash overseas for years in the hopes of a special rate from the US government, is unlikely to acquiesce to those demands now. The benefits of such a move simply do not measure up to the costs.
What are those benefits any way? According to those hoping for a special dividend, Apple Inc. (NASDAQ:AAPL) needs to pay out a lump sum in order to stabilize the price of the company’s stock, and stem the flow of stock sales in anticipation of higher capital gains in future.
If one thing is clear from the firm’s track record, it is that executives do not care about short term volatility in the share price. What Apple Inc. (NASDAQ:AAPL) cares about is long term growth. A special dividend might shore up the firm’s share price for the next month, but that isn’t in the longer term interest of the company.
Shares in the Cupertino company have been unsteady in recent months, shares are currently trading at just under $590, still a reasonable distance below the firm’s all time high of over $700, but far above its 2012 open of $405.
Apple Inc. (NASDAQ:AAPL) does not need to worry too much about fluctuations in share price, as long as it continues to grow. A move by executives to bring about recovery in the stock price could be viewed as a sign of weakness to come shrouded in short term success.
Apple is an incredibly strong company, with a great track record and great prospects. The company does not need to pay shareholders to keep the stock price up, and it certainly doesn’t need to hand over billions to the US government. A special dividend looks unlikely.