Bloomberg News

Apple Not on Special-Dividend Bandwagon: Chart of the Day

December 04, 2012

Anyone who expects Apple Inc. (AAPL:US) to follow other U.S. companies and pay a special dividend before tax rates increase probably will be disappointed, according to Chris Whitmore, an analyst at Deutsche Bank AG.

“The company is more focused on building a track record of predictable dividend growth” than making a one-time payout, Whitmore wrote in a Nov. 30 report. In August, the maker of iPhones and iPad tablet computers resumed quarterly dividends for the first time since 1995. Apple is paying $2.65 a share.

The CHART OF THE DAY illustrates why speculation about a special dividend would arise. Apple had $121.3 billion in cash and securities as of Sept. 29, when its most recent fiscal year ended. The total rose by $4 billion last quarter even with the initial payout, amounting to $2.5 billion.

Apple’s holdings may climb to $156 billion next September and $200 billion in September 2014, according to Whitmore, who is based in San Francisco. The estimates reflect the Cupertino, California-based company’s dividend rate and its plans to buy back $45 billion of shares over three years.

“Special dividends do not tend to have a lasting benefit to shareholders,” he wrote, adding that Apple’s stock is worth buying regardless of whether the company pays one. His 12-month price estimate is $800, up 36 percent from yesterday’s close.

More than three dozen companies in the Russell 3000 Index have announced one-time payouts this quarter, according to data compiled by Bloomberg. The top federal tax rate on dividends may increase to 43.4 percent from 15 percent next year as part of the so-called fiscal cliff, consisting of higher taxes and spending cuts.

To contact the reporter on this story: David Wilson in New York at dwilson@bloomberg.net

To contact the editor responsible for this story: Chris Nagi at chrisnagi@bloomberg.net


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Companies Mentioned

  • AAPL
    (Apple Inc)
    • $100.11 USD
    • -0.64
    • -0.64%
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