Money Manager Howard Ward of Gamco Investors Inc said on Tuesday that he believes Apple will be announcing a “significant” dividend in the first half of 2012. The analyst didn’t cite sources, but he stated categorically that the company will be issuing a dividend next year.
In an interview on Bloomberg TV, Mr. Ward said, “Apple’s going to pay a dividend next year. It’s going to be significant. They’re going to have a hundred billion dollars in cash on the balance sheet at year end. My goodness, they don’t need all that. They can leave that on the balance sheet, still pay out a nice dividend, and still grow the cash hoard.”
Since the return of the late Steve Jobs to Apple in 1997, the company has never paid a dividend—Mr. Jobs often made that dividends were for companies that weren’t growing. He also once said that he wanted to “keep the powder dry,” meaning that the company wanted to keep its cash handy in case it wanted to buy something or make some other strategic investments.
In the meanwhile, Apple also has a track record for leveraging that money to secure favorable component deals, and the company has made many direct investments in its supply chain.
Apple has even made a few acquisitions over the last ten years, but far fewer than other large tech companies, and always in small companies that brought people or technology it needed, rather than large companies that could provide new revenue streams for Apple. In recent days, for instance, Apple has been reported to be in the process of buying Israeli Flash memory firm Anobit for US$500 million.
The reality, however, is that Apple’s cash hoard as continued to increase in leaps and bounds, and some institutional shareholders and analysts have been increasing pressure on Apple to begin spending some of that money on stock dividends or a share buyback.
On October 18th, newly ordained Apple CEO Tim Cook said during Apple’s quarterly conference call with analysts that, “I’m not religious about holding cash or not holding it. The cash that we do spend, we’re doing an extremely good job of it and we’re very frugal about using it and using it in the right places.”
This marked the first indication of any sort that there might be a change in Apple’s cash plans, which brings us back to Gamco’s Howard Ward. Mr. Ward, who noted that AAPL is the largest holding in the $36.1 billion he manages at Gamco, was quite definitive in his statement. “Apple’s going to pay a dividend next year. It’s going to be significant.”
As a definitive statement, it makes for a sexy story and sexier headlines, but without sourcing the basis for that statement, it’s impossible to know whether this is leaked information he is privy to or an opinion based on common wisdom that $100 billion is simply more money than a company needs to have on hand to do anything it wants. This is especially true with Apple, which has heretofore never spent anything close to even $1 billion making outside acquisitions.
Shares in AAPL have posted a strong rally during Tuesday’s sessions, and are currently trading at $394.57, up $12.36 (+3.23%), on moderate volume.
*In the interest of full disclosure, the author holds a tiny, almost insignificant share in AAPL stock that was not an influence in the creation of this article.