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Post by Luckychoices on Nov 18, 2012 14:36:26 GMT -8
I know that many on this board dislike the fact that Apple pays quarterly dividends. As a long term "Buy and Hold" Apple shareholder, I consider it very much a positive for the reasons shown below.
Backstory: Back in 2009 and 2010, my wife and I were putting money into a credit union account to fund the future purchase of a new car. In June of 2010, I finally woke up, decided to drastically modify our plan, and used the credit union money($34,367.95) to purchase Apple shares(130 shares @$264.30) in a special "car fund" account figuring that was a much better way to save towards our goal. At this point (11/18/12), with 137 shares in our "car fund" account, the total value of 137 shares is $72,292.16 (@$527.68), an appreciation of 93.7% (total cost of shares was $37,313.82), in a month short of 2.5 years. Even with this recent, painful drop from Apple's ATH, that beats the heck out leaving the money in a credit union account to save for a car.
The Dividends Breakdown: My wife and I currently have about 62% of our Apple stock in IRA's and the rest in trust accounts. Last August, all of our Apple dividend money (from both IRA and trust accounts) went to purchase additional 100 Apple shares. This most recent dividend payout is being handled differently.
How Apple dividends changed our car purchase plan: Our intention back in 2010 was to sell the 137 shares to fund our new car purchase when we were ready to buy. But now, faced with paying for our new car next month, we're able to use the $25,490.35 in November dividends from our non-IRA accounts along with about $30,000 accumulated in our BofA account to fund all but about $5000 or so to pay for our new car. The dividends in our IRA accounts were used to purchase an additional 79.8 Apple shares(@ $519.42)*. So instead of having to sell 137 shares, we'll instead have to sell perhaps only 10 shares. That, of course, will preserve those extra 127 shares to continue accruing dividends.
*Purchasing shares at $700 would have given us only 59.9 shares so this was our only benefit from the drop in share price. I'd still rather we'd gone UP from $700.
How Apple dividends affect our retirement income: When the income from my wife's retirement and my retirement is added to my Social Security, it exceeds our trust account dividends by about $5000 per year. But if Apple raises their dividend ever so slightly, say to $2.85, our Apple dividends from our trust accounts, will exceed our retirement money every year. In 2013, at age 70 1/2, I'll have to start taking yearly distributions from my IRA accounts. For us this will essentially mean converting IRA Apple shares to trust Apple shares and paying any taxes due on the distribution. This will give us access to the additional dividends that will be showing up in our trust accounts instead of my IRA accounts. I'm sure I'm not the only "Buy and Hold" shareholder on this board who appreciates the dividends. If there are negative long term ramifications in dividend payments I'm overlooking, and there may very well be some, please enlighten me. Thanks!
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Post by mbeauch on Nov 18, 2012 14:43:46 GMT -8
You basically bought shares on margin without the fear of having a margin call.
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Post by roni on Nov 18, 2012 14:45:21 GMT -8
Apple needs to continue the divvy and needs to increase it by between 10 and 15% a year. After a few years of that, it will get increasing attention from serious dividend growth investors.
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Post by mbeauch on Nov 18, 2012 15:35:44 GMT -8
Honestly I would prefer a buy back. Less shares means the divvy would go up without effort.
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Mav
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Post by Mav on Nov 18, 2012 15:54:14 GMT -8
Divvies have consequences. (I'm sorry, was that unintentionally political? ) Well, it IS true. Now that there's a divvy in place, I wouldn't mind Apple focusing on buybacks. Apple uses its own cash to more than just counter share dilution, I get share price support without the lousy dividend taxes. Buybacks _usually_ are bad signs. For top-tier, quality companies like Apple, buybacks can be a huge deal. I bet Oppenheimer and a more than few others at Apple wouldn't have minded buying this recent dip and adding to treasury stock. If you think about it, Apple is one of the - maybe the only? - megacap that has even a half-decent shot at taking itself private eventually with all the cash it's generating.
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mark
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Post by mark on Nov 18, 2012 16:46:11 GMT -8
I know that many on this board dislike the fact that Apple pays quarterly dividends. As a long term "Buy and Hold" Apple shareholder, I consider it very much a positive for the reasons shown below. Backstory: Back in 2009 and 2010, my wife and I were putting money into a credit union account to fund the future purchase of a new car. In June of 2010, I finally woke up, decided to drastically modify our plan, and used the credit union money($34,367.95) to purchase Apple shares(130 shares @$264.30) in a special "car fund" account figuring that was a much better way to save towards our goal. At this point (11/18/12), with 137 shares in our "car fund" account, the total value of 137 shares is $72,292.16 (@$527.68), an appreciation of 93.7% (total cost of shares was $37,313.82), in a month short of 2.5 years. Even with this recent, painful drop from Apple's ATH, that beats the heck out leaving the money in a credit union account to save for a car. The Dividends Breakdown:My wife and I currently have about 62% of our Apple stock in IRA's and the rest in trust accounts. Last August, all of our Apple dividend money (from both IRA and trust accounts) went to purchase additional 100 Apple shares. This most recent dividend payout is being handled differently. How Apple dividends changed our car purchase plan:Our intention back in 2010 was to sell the 137 shares to fund our new car purchase when we were ready to buy. But now, faced with paying for our new car next month, we're able to use the $25,490.35 in November dividends from our non-IRA accounts along with about $30,000 accumulated in our BofA account to fund all but about $5000 or so to pay for our new car. The dividends in our IRA accounts were used to purchase an additional 79.8 Apple shares(@ $519.42)*. So instead of having to sell 137 shares, we'll instead have to sell perhaps only 10 shares. That, of course, will preserve those extra 127 shares to continue accruing dividends. *Purchasing shares at $700 would have given us only 59.9 shares so this was our only benefit from the drop in share price. I'd still rather we'd gone UP from $700. How Apple dividends affect our retirement income: When the income from my wife's retirement and my retirement is added to my Social Security, it exceeds our trust account dividends by about $5000 per year. But if Apple raises their dividend ever so slightly, say to $2.85, our Apple dividends from our trust accounts, will exceed our retirement money every year. In 2013, at age 70 1/2, I'll have to start taking yearly distributions from my IRA accounts. For us this will essentially mean converting IRA Apple shares to trust Apple shares and paying any taxes due on the distribution. This will give us access to the additional dividends that will be showing up in our trust accounts instead of my IRA accounts. I'm sure I'm not the only "Buy and Hold" shareholder on this board who appreciates the dividends. If there are negative long term ramifications in dividend payments I'm overlooking, and there may very well be some, please enlighten me. Thanks! With the large quantity of shares you own, and quite obviously large income, have you accounted for the strong possibility that dividends will be taxed at a much higher level in 2013? 2012 - 15% + state 2013 - up to 39.5% + state + 3.8% medicare In CA, for example, the worst case could be: 2012 - 25% 2013 - 55.3%
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Mav
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Post by Mav on Nov 18, 2012 16:59:42 GMT -8
I don't think Apple's blind to changes in tax law. I'd welcome more emphasis on buybacks than dividends, if Apple picks one for next year. There's literally more bang for the buck for the shareholder when you account for potential divvy tax increases, surtaxes, etc.
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Post by roni on Nov 18, 2012 17:29:56 GMT -8
I would not call it a strong possibility at this time, but then I am not particularly ideological.
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Mav
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Post by Mav on Nov 18, 2012 17:40:32 GMT -8
It really all depends on actuality . Clearly, Cook and Co. are OK with dividends (and increasing them) under present tax treatment.
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Post by Luckychoices on Nov 18, 2012 19:03:15 GMT -8
I know that many on this board dislike the fact that Apple pays quarterly dividends. As a long term "Buy and Hold" Apple shareholder, I consider it very much a positive for the reasons shown below. I'm sure I'm not the only "Buy and Hold" shareholder on this board who appreciates the dividends. If there are negative long term ramifications in dividend payments I'm overlooking, and there may very well be some, please enlighten me. Thanks! With the large quantity of shares you own, and quite obviously large income, have you accounted for the strong possibility that dividends will be taxed at a much higher level in 2013? 2012 - 15% + state 2013 - up to 39.5% + state + 3.8% medicare In CA, for example, the worst case could be: 2012 - 25% 2013 - 55.3% Mark, I'm not all that concerned about the possibility of increased tax rates. I remember a work friend of mine years ago worried about the horrendous taxes he'd have to pay if, God forbid, he won 50 million dollars playing Lotto. I remember telling him I'd be fine paying 90% taxes, if necessary, as long as I'd end up with 5 million. Would I rather have all 50? Sure. But 5 would also be just fine. We no longer have a mortgage deduction so I'm sure we'd take a big hit on any increased taxes. But our retirement plans never included dividend income in the first place so it's all gravy in my book.
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mark
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Post by mark on Nov 18, 2012 19:04:26 GMT -8
I would not call it a strong possibility at this time, but then I am not particularly ideological. It already *IS* ... if nothing changes, the law stands as I described it.
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Post by roni on Nov 18, 2012 19:05:41 GMT -8
I would not call it a strong possibility at this time, but then I am not particularly ideological. It already *IS* ... if nothing changes, the law stands as I described it. That is your take on it. You are welcome to it. It was designed to be temporary in any event. Will not change my investment strategies.
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Post by lance on Nov 28, 2012 6:25:01 GMT -8
All this news about special dividends is insane. I can't understand how people can say spending 40+ billion on 1 dividend to appease whining hedge funds is a good move. All it gives is a short term spike in the stock. It is a horrible waste of cash and I think would be TC's biggest mistake. The company is fine and shareholders shouldn't need a special dividend to justify buying stock in this company. Apple is a 4 product company and will never be looked at as a "safe" dividend play, so why try to turn the company into something it isn't. Apple will never be an Exxon or Coke. It is a growth stock and not a value play. I think having the cash is the best leverage to prevent the stock from falling as Apple can buyback stock whenever they like or at least have that option. Also it allows Apple it make any US acquisitions. Also when Apple called its dividend in March 19, 2012 the price closed at $601.10. The price is currently 576.85 (current pre-market price). This is 9 months later and stock is trading worse. I think the special dividend would produce a similar result.
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Post by leonb on Nov 28, 2012 6:31:53 GMT -8
Apple may be a growth company, but it is not a growth stock, if you look at the multiple. It's closer to a value stock. Of course, as a company with limited inessential relatively expensive products, it's not exactly a defensive play. But a company apparently still on a growth trajectory makes for an attractive value stock (and the cash is a value anchor).
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Post by lance on Nov 28, 2012 6:56:15 GMT -8
Leonb - I agree aapl is a cheap stock, but people buy apple for earnings growth. Call it what you want my argument was that the special dividend is plain simple a waste of money. Other than the short term spike why do it?
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Post by greyfox15 on Nov 28, 2012 7:08:00 GMT -8
Understand, co's are there to return value to their stockholders. There's 120 b. of stockholders $'s that aapl is holding amassed over a long period of time. O.K. some should be held for cushion, future divs, possible acquisitions. Re: special one time 2012 div, yes it's true that hedge funds, highly paid aapl execs would be the major beneficiaries. But about other long time aapl stockholders, say 20 yrs or so. That cash hoard was amassed under their ownership. Shouldn't they have the advantage getting the return under a lower tax rate than what appears to be higher future rates? Understand aapl pricing, but this conference is mainly concerned with immediate and short term. Steve & appl has not appeared to be concerned with that. Water will always find it's own level. All the above taken into consideration, the word for the 120 billion is "balance": cushion, buy back, div, acquisitions. Personally think some buy back is a good move and doable.
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Post by leonb on Nov 28, 2012 7:08:33 GMT -8
lance, not saying I'd do it, but there are reasons in favour of a special dividend:
1. Apple has much more cash than it needs, so a lot of it is just sitting around earning next to nothing.
2. Many analysts back out the cash when calculating the PE for comparison purposes, but some don't. I think a sub-10 PE without an analyst adjustment would be more intuitively cheap to many.
So as with the stock split, this is something which would perhaps add value to the share, though not to the business (and there is a difference, in practice).
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Post by mbeauch on Nov 28, 2012 7:14:00 GMT -8
Leonb - I agree aapl is a cheap stock, but people buy apple for earnings growth. Call it what you want my argument was that the special dividend is plain simple a waste of money. Other than the short term spike why do it? Short term spike, then once it is paid out, poof. Not even in the equation anymore. If it is used to buy back shares the benefits are long lasting.
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mark
fire starter
Posts: 1,552
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Post by mark on Nov 28, 2012 7:14:07 GMT -8
All this news about special dividends is insane. I can't understand how people can say spending 40+ billion on 1 dividend to appease whining hedge funds is a good move. Is it really hedge funds that are asking for a dividend? I'm not so sure. They tend to pay long-term capital gains rates so I doubt it makes much of a difference to them. "Waste of cash"? What else do you suggest be done with all that cash? I mean, I can see if TC is planning on opening a car company that he may need a few tens of billions, especially if he wants to vertically integrate (which there is no way someone like TC would ever do!), but seriously, what should be done with $120B of cash? In my opinion, I would prefer no dividends at all and I think the best use of cash is to buy back shares at a slow rate in a rational fashion (rational = buying back when it is low and ceasing when it rises above a certain threshold). Think about it this way - if I am buying/holding shares now because I perceive value, why shouldn't the company also want to buy shares now? Wouldn't they also perceive the same value (if not more so having more information than I have)? However, if Apple has already decided to distribute dividends, and they have decided so, I would prefer to receive the bulk of those dividends before the end of 2012 rather than in 2013/14/15/16/etc.
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Post by qualitywte on Nov 28, 2012 7:19:04 GMT -8
Can someone please break out a special dividend thread today?
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Post by prazan on Nov 28, 2012 7:20:44 GMT -8
All this chatter about a special dividend is confusing me. Has anyone listed a reliable source that suggests Apple is about to distribute one? If yes, please link again, because I missed it. Or is this all conjecture, based on what a few other companies have done? If it's conjecture, wouldn't our time be just as profitably spent planning to save our portfolios in the event we're hit by astroids?
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Post by mbeauch on Nov 28, 2012 7:24:07 GMT -8
All this chatter about a special dividend is confusing me. Has anyone listed a reliable source that suggests Apple is about to distribute one? If yes, please link again, because I missed it. Or is this all conjecture, based on what a few other companies have done? If it's conjecture, wouldn't our time be just as profitably spent planning to save our portfolios in the event we're hit by astroids? Prazan, you must have missed the story yesterday. It was all over CNBC and AAPL spiked $4-5 when the discussion started.
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Post by prazan on Nov 28, 2012 7:29:57 GMT -8
All this chatter about a special dividend is confusing me. Has anyone listed a reliable source that suggests Apple is about to distribute one? If yes, please link again, because I missed it. Or is this all conjecture, based on what a few other companies have done? If it's conjecture, wouldn't our time be just as profitably spent planning to save our portfolios in the event we're hit by astroids? Prazan, you must have missed the story yesterday. It was all over CNBC and AAPL spiked $4-5 when the discussion started. Google shows 572.58 as the low. By the way, CNBC suffers from logorrhea. Lots of idle speculation.
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Post by greedynoob on Nov 28, 2012 7:39:12 GMT -8
But about other long time aapl stockholders, say 20 yrs or so. That cash hoard was amassed under their ownership. Shouldn't they have the advantage getting the return under a lower tax rate than what appears to be higher future rates? So what? They can sell some shares if they want to get some of that return, and they'll pay an EVEN LOWER rate.
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Post by greedynoob on Nov 28, 2012 7:47:12 GMT -8
Has anyone listed a reliable source that suggests Apple is about to distribute one? No. And we'd all do well to remember that the last time Apple decided to issue a dividend, they dropped hints about it well in advance. Should we really expect less if they decided to issue a big special dividend? Or is this all conjecture, based on what a few other companies have done? If it's conjecture, wouldn't our time be just as profitably spent planning to save our portfolios in the event we're hit by astroids? Yes.
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Post by mbeauch on Nov 28, 2012 7:55:28 GMT -8
Understand, co's are there to return value to their stockholders. There's 120 b. of stockholders $'s that aapl is holding amassed over a long period of time. Really? It has been amassed over the last 5 years. Long term shareholders have been rewarded with a 5000% return and now a dividend. There is no better value to the shareholders than buying back the stock. It does not create another immediate taxable event and raises the EPS. It also lowers the supply of available shares which provides automatic support. Lovey, please work your magic and separate all of this from the intraday.
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Post by lance on Nov 28, 2012 9:58:08 GMT -8
I think Apple growing their cash honestly long term is better than spending 40billion (or whatever the amount) on a single day dividend. Apple has been growing their cash the last few years and the stock has grown massively without a dividend. Buying power to me will be better than 1 large payout. 6 months after the special dividend do you think aapl will still be up because they paid a one day dividend. I don't think it will. The question you have to ask is why do you buy shares in apple? I don't think there is a single person who can say they invest because they need a special dividend. So to me it will only bring short term interest. People buy apple because it is a cheap stock for a growing company. We are about to have the largest quarter in history. I think great earnings will move the stock up more than any special dividend can.
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Post by mbeauch on Nov 28, 2012 11:57:07 GMT -8
Lance, in the end, only earnings matter. I invest in Apple because I feel it is fundamentally the best company in the world. I stick with it because it is the most undervalued company on the stock market.
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Mav
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Post by Mav on Nov 28, 2012 13:36:16 GMT -8
It's frustrating as hell to trade, but actually pretty "safe" to hold, exactly because of the stellar fundamentals and 10-years-in-the-(overly pessimistic)-future valuation.
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Post by dmiller on Nov 29, 2012 9:15:58 GMT -8
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