The Breakdown

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Could Apple actually pay shareholders?

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33560 full

The bigger Apple gets, the more pressure it comes under to share some of the wealth. With a cash pile now approaching $100 billion, the idea of a one-time dividend is being floated. This is from Therese Poletti at MarketWatch:

“Instituting a regular dividend would be a signal of a new maturity in the way the company views itself,” [said management professor James] Post.... “That would be a much bigger statement of change for the company. I think there is probably a debate going on.” And the ghosts of CEOs past are clearly in the room.

Post said a special dividend could be an interim solution for the company. “If they want to they can always come back in a year or two or three, they can do it again, but they are not committing themselves to a regular dividend,” he said. “It would be seen as a pretty big departure from the Jobs era.” It’s a tactic used by Microsoft in 2004, when it announced a one-time dividend of $3 a share, to use return some cash to investors.

A one-time dividend is obviously not very popular among most investors.

“I think that Apple’s stock is and should be like Apple’s sales and products, insanely great,” said individual shareholder King Lear, who spoke up at the company’s annual meeting last year. “Defined quarterly dividends would increase the value of the stock in addition to its incredible capital growth.”

Pretty clear statement of where both schools of thought are right now, don't you think? Poletti makes the useful point that dividends aren't very Apple — in other words, they aren't very "cool." Boring stocks pay a regular quarterly dividend. Companies that are growing, like Apple, sit on cash or pour it back in to the business.

But the question — with Apple's share price having appreciated 40 percent from last January — is, "Will future growth be elusive?" And let's not forget about the competition. It's invisible right now, but this is capitalism and tech, so it won't stay that way. If Apple doesn't give back or spend some of its cash hoard, it's liable to have to use it later to beat back challengers. 

Investors may be anticipating this drain and asking for their payout now. On balance, a one-time special dividend isn't a bad idea. If handled properly, it would enable everyone to get what they want.

Follow Matthew DeBord and the DeBord Report on Twitter.

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