Dividends are taxed like...dividends. Through 2012, qualified dividends are taxed at 0% or 15% depending on the recipient's income, same as long term capital gains. It is very likely there will continue to be favorable tax treatment of dividends (maybe LTCG and Dividends both at 20%) after 2012.
Apple isn't an investment conglomerate; it doesn't have as many ways to invest money as a company like Berkshire.
Part of the issue is that a good bit ($55b of about $80b as of September 2011) of Apple's cash is overseas, but it's unlikely Apple would pay out a large enough dividend to seriously deplete even the US cash hoard. There is an argument that Google, Apple, Cisco, etc. are all waiting for a special "5% tax on repatriated income" tax holiday in 2012+ (like in 2004) to bring back a lot of it. It's all income on which US tax has not yet been paid, so paying 5% vs. 35% would be a big win.
It is definitely up to Apple whether they do share buyback vs. dividend, but once your cash is clearly beyond
There is near zero chance Apple would make a $50-70b acquisition. They have never done that. If they suddenly deviated from their (successful) strategy, it would probably tank Apple's stock twice -- both less cash and an ineffective and risky use of the cash, distracting to Apple's core product, and would call into question both the executive leadership and the board of directors. I'd be surprised to see Apple make purchases beyond $1-5b, and even that would really be pushing it.
I agree with the parent - no way would Apple want to do a massive acquisition.
I also agree with the grandparent, Apple is unlikely to part with its cash soon.
All the cash is Apple's "war chest" - it's let them do innovative things with their supply chain (prepay for ~$1bn in parts to get a substantial discount), it's let them fight a massive patent battle (we'll see if this pays out), and gives them all sort of flexibility moving forward.
Could they do all of the above things with less than $100bn in the bank? Of course, but the massive cash hoard allows them to continue doing the activities above, even if sales/growth slow down.
Normally what you'd do at a mature company in a mature industry (oil, finance, etc.) is pay out 10-30% of your earnings, one or two times per year (or maybe quarterly). Apple would still keep (and keep adding to) its war chest.
Wall Street does heavily penalize companies which have started paying dividends if they ever cut the dividend (or end it), much more than it rewards companies for paying the dividend in the first place.
It's tricky -- tax policy (which does change over time), earnings, other uses of capital, and market expectations, all change.
Apple isn't an investment conglomerate; it doesn't have as many ways to invest money as a company like Berkshire.
Part of the issue is that a good bit ($55b of about $80b as of September 2011) of Apple's cash is overseas, but it's unlikely Apple would pay out a large enough dividend to seriously deplete even the US cash hoard. There is an argument that Google, Apple, Cisco, etc. are all waiting for a special "5% tax on repatriated income" tax holiday in 2012+ (like in 2004) to bring back a lot of it. It's all income on which US tax has not yet been paid, so paying 5% vs. 35% would be a big win.
It is definitely up to Apple whether they do share buyback vs. dividend, but once your cash is clearly beyond
There is near zero chance Apple would make a $50-70b acquisition. They have never done that. If they suddenly deviated from their (successful) strategy, it would probably tank Apple's stock twice -- both less cash and an ineffective and risky use of the cash, distracting to Apple's core product, and would call into question both the executive leadership and the board of directors. I'd be surprised to see Apple make purchases beyond $1-5b, and even that would really be pushing it.
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