Apple Dividends: Are you kidding me!

Apple needs to pay a dividend.

Really.

I no longer buy the Tech "Growth" myth.  It is true for small tech firms with no income investors to pay hypergrowth curves but not for large established companies with large institutional investors.  Business is business.

Legitimate uses for cash in a business are investment in capacity, or investment for return.  Apple invests plenty in capacity, R/D and innovation but realistically what could they invest $20 billion dollars in?  they could build New Yankee stadium 20 times!  As for Return .   Braeburn Capital in Reno is owned by Apple and invests their cash.  Returns for cash are pitiful right now.  Every dollar not returning the growth of the computer/ipod/iphone business is dilutive to earnings.

Apple has $27 billion dollars in Current Assets and NO debt.  Apple should reward the investors that own equity in the company.  Pay the shareholders that have taken the risks on the company a yield on their investment.  Apple added 17 Billion dollars to their current assets in the 33 months since Sept 2005.  OVER a half a billion a month!.  If Apple had paid 5.00 per share dividend for each of the last three years they would currently have more than 10 Billion in the bank and no debt.  

Ignoring "Agency" issues that could motivate a company to hold cash more than what would be prudent Here is a list of some reasons that Apple should be paying a dividend.

1, Holding cash in excess of current needs is dilutive to earnings.  (over simply... if Apples market cap is 90b and they have 30b in the bank: earnings of 20x is diluted to 30x plus the cash)

2, A significant block of shareholders cannot, due to investment guidelines buy stocks with zero yield.  (Pensions)

3, If Apple were paying a dividend do you really think the shareprice would have halved in the last 10 months?

4, Among companies with a market cap over 25B (Aprox. 165 companies yahoo finance) there are only 8 that pay NO dividend (Apple, Oracle, Transocean, Amgen, DirectTv, Goog, Berk-A, CSCO)

5, Its the shareholders money.

6, There is currently no better use for the money.  (EG Yields for cash investments are crap)

Writer is long Apple and wants a dividend!  don't do anything because this guy thinks you should. not that he thinks you should, see it is a slippery slope thinking you know what I mean.  Don't do it!

Apple Cheap: Unless it's Not

So World financial markets are melting down  and our favorite stock looks cheap cheap cheap.  Not so fast...

Apple is only cheap IF it is cheap relative to other alternatives in the market.   Since we have limited information and ability to research all the information about all the stocks in the marketplace we use the S&P as a proxy for the market and a warning.  In 1932 the average PE for the entire S&P 500 index was 8!

Apple is currently selling for 19X Earnings (14 if you deduct the cash they should be paying shareholders in stock buybacks/dividends)  The median P/E since 1920 is 15.7 (Robert Shiller Yale via Investopedia) and has been BELOW 10x earnings 5 times for a cumulative 11 years.  

Apple is easy to love and certainly the stock is, on a P/E basis the cheapest it has been in years, what is not clear is whether it is cheap relative to other stocks available in the marketplace.  What is Dell's P/E?

Apple TV: The Second Coming or iBrick

The folks at TUAW caught wind of a rumor regarding a possible update of Apple TV coming this Tuesday Sept 30th.  

No Predictions here as to what may or may not happen except to say that the current version of Apple TV is the only and original version of the Apple TV.  It is entirely possible that Apple TV is being updated without ANY real functionality change except to upgrade the hard drive and possibly the video output.  But heck maybe this is the iBrick, the second coming of the Apple TV.

If it is...  Than this is a good time to update my thoughts from a prior post regarding Apple TV.

To sell broadly Apple TV must Replace some or all of the products and services that it currently competes against.  It must be a Set Top Box Replacement.  It must be an effective replacement for Blockbuster/Netflix and it must have a working PVR. 

By broadly the market must reach beyond us geeks so ruling out those of us using any Elgato Product. (sorry Elgato your market is gadget geeks, but you knew that) 

In addition, and this is the deal breaker, Apple has to get hollywood to play along.  Without content equivalent to NetBuster (netflixBlockbuster)  say 95% of new releases and a back catalog of thousands,(Currently there are less than 1,900 movies available for rent in iTunes)Apple will only have limited sales with Apple TV.  

If they did it it would be too expensive for broad acceptance initially but who knows maybe this is the product they "Crush" their margins with.  Certainly the integration with iPhone/iPod Touch would be kick ass.

Longer Term Apple really wants to be the company to provide integrated home entertainment solutions but we are not likely ready for that yet.  For Now Apple TV Remains a serious Hobby.  The products existence gives Apple a reason to assign resources and keep tabs on the market.  

We will see on Tuesday.