Comments on: Apple’s new pitch to investors A slice of lime in the soda Sun, 26 Oct 2014 19:05:02 +0000 hourly 1 By: MaysonLancaster Thu, 25 Apr 2013 20:57:13 +0000 Two questions:

1) When Apple posts another few quarters with 50%+ growth in the next few years, what will happen to its share price?

2) What makes Apple’s dollar of revenue, with ~40% gross margin worth about as much as Amazon’s, with single digit margins (if that)?

By: ManxStef Thu, 25 Apr 2013 15:04:05 +0000 @KenG_CA @ y2kurtus — you do realise that as well as the buy-back, Apple’s board also agreed to increase the quarterly dividend by 15%, right? So they _are_ directly returning more cash to the shareholders.

By: gfodor Thu, 25 Apr 2013 04:31:43 +0000 @KenG

Dividends may be a more tangible form of returning cold, hard, cash to shareholders, but buybacks are more efficient at transferring corporate profits (in the form of *capital*) back to investors. When they say they are transferring capital to investors in buybacks they are not referring to the investors they buy shares from (who do, in the open market, get cash) but to the *other* shareholders who in turn get to own a larger portion of the company when the bought-back shares are cancelled.

Yes, you are still subject to the whims of the market when you want to liquidate your equity, but buybacks are attractive to true long term investors since the company is essentially issuing additional equity to you just for being a shareholder, tax free. Unless you assume the market is never efficient, that equity will eventually be priced fairly.

By: TheBasicMind Wed, 24 Apr 2013 10:47:46 +0000 @KenG_CA

Clearly it’s a matter of point of view. No Apple haven’t returned cash to you, but you are not “investors” plural, nor does use of the term “investors” plural have to relate to any particular set or subset of your choice. I’m not sure it can be much simpler. A market is a place of buyers and sellers. Apple are buying back shares they previously sold to the market (not to you specifically) at a lower rate than the current share price. They are quite clearly returning cash to investors (which in fact they would be doing regardless of the current share price) !!!

By: y2kurtus Wed, 24 Apr 2013 02:09:45 +0000 @KenG_CA

AMEN AMEN AMEN!!! As a small investor with mostly tax sheltered money I would much rather see a dividend than a share-buyback. Dividends are the only return on an investment that can’t be lost if share prices drop.

The only exception to that would be when the share price is below book value which is most certainly not the case with AAPL.

You know who would rather see buybacks than dividends? The .00001% Tim Cooks expense account takes care of most of his expenses. He doesn’t need the dividend income of his $300,000,000. He could easily put a few million shares in a brokerage account and borrow against them at 2% interest. No dividend tax to pay, no gains tax to pay, easy money!

If Warren Buffet’s company paid a 3% dividend that would net him a cool billion dollars in annual dividend income which would be taxed at 23.8% federal… call it 200 million in taxes paid for round numbers. By not paying a dividend the money keeps growing within Berkshire and he pay’s nothing on that wealth creation. EVER! God bless the USA!!!

By: KenG_CA Tue, 23 Apr 2013 23:24:13 +0000 I fail to see how when companies like Apple buy shares back, they are “returning cash to shareholders”. Those shareholders who decide to sell shares at that time don’t actually get to choose to sell the shares to Apple, and in any case, they can always sell the shares on the open market. If I’m not selling my shares, they’re not returning that cash to me. Cash dividends are the only way a company returns cash to shareholders; buying shares just reduces the number of shares in circulation, which doesn’t always yield gains for shareholders. And even if those repurchases result in share appreciation (but how do you know if that’s the cause?), it’s still not returning cash to shareholders, it’s only increasing the value of the stock, which is of no value until it’s sold.

It seems obvious Apple doesn’t want to bring profits home and pay taxes on them, which is why the tax code should be modified to exempt repatriated profits from taxes at the corporate level when they are distributed to shareholders. Instead of sitting in off-shore accounts doing nothing, that money would be distributed to shareholders, many of which are in the U.S., who would be forced to do something with the money, and also pay taxes on it. I’m guessing Apple will keep all those profits in some foreign bank account, which might be lent to another company that wants to borrow money to pay dividends because it doesn’t want to pay taxes on foreign profits.