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Portfolio Insights by Brett Arends Archives | Email alerts
Oct. 19, 2011, 12:01 a.m. EDT
By Brett Arends, MarketWatch
BOSTON (MarketWatch) "” Hey, Tim Cook!
After last night's quarterly earnings, I have four words for you. (And no, they're not "I want an iPhone.")
Show us the money!
Apple's /quotes/zigman/68270/quotes/nls/aapl AAPL -5.25% new CEO should start paying dividends. Now.
What is he waiting for?
Apple said last night that as of Sept. 24, the end of the fiscal year, it was sitting on $116 billion in cash, marketable securities and other assets. Read our coverage of Apple's earnings report.
Some of that is the value of the property and equipment, and accounting nonsense like goodwill. But even when you exclude those things, you're still left with a gigantic $104 billion in cash, securities and other liquid assets.
Maker of iPhones and iPads posts earnings growth of more than 50% for the quarter, but even though consumers were seen likely holding off to wait for the new iPhone, expectations were very high, tech editor Dan Gallagher tells Stacey Delo.
This isn't a software company. It's a money mountain. If Apple held its money in gold bullion, it would be bigger than the SPDR Gold Trust /quotes/zigman/41663/quotes/nls/gld GLD -1.30% .
When you then deduct the company's $40 billion in liabilities you're left with a net $64 billion that it could just mail out to stockholders as checks. That's about $69 per share "” about 18% of the stock price, which tumbled $24 in after-hours trading to $395.
Yet Apple could do even more. The company could easily borrow another $50 billion or so without even breaking a sweat. In so doing it would seize on today's super-low interest rates and reduce its taxes. That would be great for investors, most of whom can't borrow so cheaply themselves.
Even if Apple borrowed a mere $29 billion "” the equivalent to no more than last quarter's sales "” that could raise the special dividend to $100 a share. No problem.
In other words, the company could hand out $93 billion to investors, many of them ordinary middle-class people around the country. Talk about an economic stimulus!
Why not? Apple's not using the money. Growth and research & development are financed easily out of current earnings. This money is just lying around, earning minimal amounts of interest.
Tim "” give it to the people! Spread the wealth around!
And look at how this cash is piling up. It's risen by an astonishing $22 billion from a year ago. That included $3 billion even over the slow summer months (which, the company said, were hit by a slowdown in iPhone sales as customers waited for the new iPhone 4S).
The annual cash flow was equal to about $24 a share.
So if Tim Cook didn't want to pay a special dividend, but merely distributed this annual surplus, it would mean the stock "” at the overnight price of $395 a share "” would have a thumping dividend yield of 6%.
That's quite something.
And even if Apple decided to be super-conservative and pay out just 50% of earnings, the yield would still be (obviously) half that, or 3%.
That's better than Coca-Cola /quotes/zigman/222647/quotes/nls/ko KO +0.78% (2.8%) or Exxon /quotes/zigman/203975/quotes/nls/xom XOM -1.03% (2.3%).
Not bad.
Brett Arends is a senior columnist for MarketWatch and a personal-finance columnist for the Wall Street Journal.
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Brett Arends is an award-winning financial columnist with many years experience writing about markets, economics and personal finance in Europe and the U.S... Expand
Brett Arends is an award-winning financial columnist with many years experience writing about markets, economics and personal finance in Europe and the U.S. He has received an individual award from the Society of American Business Editors and Writers for his financial writing, and was part of the Boston Herald team that won two others. He was educated at Cambridge and Oxford Universities, and has worked as an analyst at McKinsey & Co. He is a Chartered Financial Consultant (ChFC) and Accredited Asset Management Specialist (AAMS). His latest book, "Storm Proof Your Money," has just been published by John Wiley & Co. Collapse
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