Thursday, March 22, 2012

Apple's Wealth Redistribution

     This week Apple Corp. announced it would be instituting a $2.65 per share dividend and a 10 billion dollar stock buy back program. This comes on the heals of public pressure to do something with the 100 billion dollars in cash the company has accumulated as a result of their phenomenal success. Steve Jobs, when he was alive, resisted giving a dividend or buying back stock. His theory was that the best way to reward shareholders is by increasing the value of the company with innovative products that people wanted.
     I scratched my head when I heard the news of an Apple dividend because it only amounts to 1.8 percent a year. The stock has increased in value by 8000 percent over the last 10 years, which averages 800 percent a year. And for the foreseeable future there seems to be no stopping this tech juggernaut. The best incentive any company can give investors is an increase in share value like Apple has provided in the last decade. Apple's 100 billion in cash is wasted on a dividend and should be saved to purchase a company that would add value to Apple. At the very least the cash should be saved to act as a buffer against hard times.
     So why did Apple redistribute its wealth with a dividend and stock buy back? The answer is more political than it is financial. Apple, under the leadership of Tim Cook, wishes to curry favor with the anti-capitalist and anti-success media. It's not enough for a company to have stellar earnings quarter after quarter, the left in this country thinks they are required  to pay penance for their success. It is also the same thing which motivates companies to have "green" initiatives. They want the mainstream media to print favorable stories about them and how much they care about the environment. This slavish adherence to political correctness has no place in business. Companies exist for one reason; to supply a product or service that people want. If they do this task successfully, they make a profit. The more profit they make, the more people they can hire. Their success also means gains for their shareholders. The shareholders can take their gains, if they so choose, and invest in other companies, their own businesses or in the general economy. This is how an economy grows and prospers and provides opportunity and wealth for those who participate in it. This fact is sadly missed by those in the main stream media, the Democrat party and, apparently, by Tim Cook.

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