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The One Important Financial Tidbit From Apple's Shareholder Meeting

By newadmin / Published on Wednesday, 14 Feb 2018 23:06 PM / No Comments / 7 views


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Shareholder meetings are typically boring affairs. There is a fair amount of Robert’s Rule of Order to follow regarding the items in a company’s proxy and the overall agenda of the meeting. These can take up a decent amount of the hour that they typically last. Apple’s question and answer portion of the meeting can be a bit more interesting given the nature of its products and the high turnout it receives. There usually isn’t any important information revealed by management that hasn’t already been discussed publicly, but there was one financial tidbit yesterday. (Note that I own Apple shares and have sold Put options).

Apple CEO Tim Cook kicks off the event for a new product announcement at the Steve Jobs Theater. AP Photo/Marcio Jose Sanchez

What to do with all the cash

During Apple’s February 1 conference call on its December quarter’s results Luca Maestri, Apple’s CFO, said “Our current net cash position is $163 billion. And given the increased financial and operational flexibility from the access to our foreign cash, we are targeting to become approximately net cash neutral over time. We will provide an update to our specific capital allocation plans when we report results for our second fiscal quarter, consistent with the timing of updates that we have provided in the past.”

Apple should have about $125 billion in net cash after it pays the $38 billion in taxes to bring back its overseas cash and investments. The net cash position should increase as time goes by, but investors are rightly focused on what to do with this one time cash injection. Since the company can fund its operations and dividends from its quarterly profits there are essentially four areas that Apple could spend the money: one-time dividend, acquisitions, boost its annual dividend more than recent increases or stock buybacks.

One-time dividend has almost no odds of happening

At the shareholder meeting Tim Cook essentially shot down the idea of a one-time dividend by saying he didn’t think that it “really helps the company or shareholders”. I agree that this is the least beneficial use of the cash. Investors give greater value to increasing the dividend every year and larger EPS than a one-time payment.

Acquisition strategy probably won’t change

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Shareholder meetings are typically boring affairs. There is a fair amount of Robert’s Rule of Order to follow regarding the items in a company’s proxy and the overall agenda of the meeting. These can take up a decent amount of the hour that they typically last. Apple’s question and answer portion of the meeting can be a bit more interesting given the nature of its products and the high turnout it receives. There usually isn’t any important information revealed by management that hasn’t already been discussed publicly, but there was one financial tidbit yesterday. (Note that I own Apple shares and have sold Put options).

Apple CEO Tim Cook kicks off the event for a new product announcement at the Steve Jobs Theater. AP Photo/Marcio Jose Sanchez

What to do with all the cash

During Apple’s February 1 conference call on its December quarter’s results Luca Maestri, Apple’s CFO, said “Our current net cash position is $163 billion. And given the increased financial and operational flexibility from the access to our foreign cash, we are targeting to become approximately net cash neutral over time. We will provide an update to our specific capital allocation plans when we report results for our second fiscal quarter, consistent with the timing of updates that we have provided in the past.”

Apple should have about $125 billion in net cash after it pays the $38 billion in taxes to bring back its overseas cash and investments. The net cash position should increase as time goes by, but investors are rightly focused on what to do with this one time cash injection. Since the company can fund its operations and dividends from its quarterly profits there are essentially four areas that Apple could spend the money: one-time dividend, acquisitions, boost its annual dividend more than recent increases or stock buybacks.

One-time dividend has almost no odds of happening

At the shareholder meeting Tim Cook essentially shot down the idea of a one-time dividend by saying he didn’t think that it “really helps the company or shareholders”. I agree that this is the least beneficial use of the cash. Investors give greater value to increasing the dividend every year and larger EPS than a one-time payment.

Acquisition strategy probably won’t change

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