Apple Investors Divided on Dividends
CUPERTINO, Calif. (TheStreet) -- Apple(APPL) investors will be closely monitoring the company's annual shareholder meeting on Thursday to see whether CEO Tim Cook makes a bold dividend move.
A famous dividend non-payer, chatter about a possible dividend has swirled around Apple in recent months, and Cook has already hinted that he may rethink the company's cash strategy. Speaking last week at the Goldman Sachs Technology and Internet Conference, the CEO acknowledged that Apple has more cash than it needs.
|Apple holds its annual shareholder meeting on Thursday|
Cook, who became CEO shortly before iconic Apple co-founder Steve Jobs died last year, added that the company's dividend discussions are proceeding apace. The investor meeting will be Cook's first since assuming the CEO role.
Apple investors, however, are divided on what type of dividend is best, if indeed the company heads down that path.
"A lot of people are talking about a one-time dividend, which to me doesn't seem like an Apple thing to do," explained Ernie Varitimos, who runs the Apple Investor Trade Room . "I don't see the utility of it; it would benefit a few people that are in the right place at the right time -- that's not what Apple is about, they are about creating value and lasting value."
Instead, Varitimos wants Apple to institute a recurring dividend. "I would like to see a regular dividend -- that would be a good use of their cash," he told TheStreet. "I think that would spur a lot more institutional investment in Apple and bring it up to parity with other companies."
Not everyone, however, agrees that this would be the best course of action for the gadget giant.
"I, along with many Apple shareholders, would be very disappointed if they simply begin paying a regular dividend of 2 percent to 3 percent," explained Chad Brand, president of Peridot Capital Management and author of the Peridot Capitalist blog. "Not only would that create no shareholder value, but it would not stop the cash balance from growing -- we really need a large buyback or special one-time dividend or both."
TheStreet will be live-blogging Apple's shareholder meeting from 12.30 ET:
Brand also called for more clarity from Cupertino on this issue. "The fact that Cook and the board have not even indicated which route is more likely is highly disappointing," he said. "And if their decision is not very bold, cash will keep piling up at a rate of billions per quarter, and we will have to deal with this problem every year or so, assuming the company continues to do so well."
Apple stopped paying a dividend in 1995, although, with a cash position of almost $100 billion, the tech giant has been coming under pressure to reinstate the payment. Some 70% of the respondents to TheStreet's recent poll said that Apple should start carving off its vast $96.7 billion cash haul. Almost a third of respondents, however, say that a dividend's not necessary, noting that that the iPhone maker has better uses for its cash.