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Apple's Dividend Underwhelms Some


Robin Farzad writes today that the story you just heard is no big deal. The senior writer for Bloomberg BusinessWeek joins my now from New York City. Welcome to the program once again.

ROBIN FARZAD: Thank you, Robert.

SIEGEL: And why did you write today that this, and I quote, "supposedly blockbuster news is no biggie."

FARZAD: It's such a tiny speck, it's such a tiny check that Apple will be writing as a portion of its balance sheet. I mean, after all of this PR press release victory lap running in Cupertino, this is just a 1.8 percent dividend yield. Apple has $100 billion in cash. It has, you know, it might well double that amount in two years even after paying this dividend because the cash is coming in so rapidly.

Its products are commanding such product lust that people are willing to fork over really high-margin amounts, even in a weak economy.

SIEGEL: Now, I understand that Apple is unique in many respects, but in this case, it's at the top of a list of businesses that have huge stockpiles of cash - Microsoft, Google, Cisco, Pfizer, Exxon Mobil, Johnson & Johnson. First, is this phenomenon very unusual, and if so, why are companies holding so much cash? What's in it for them?

FARZAD: Well, a huge part of this is particular to Apple in that it's been such a breathtaking comeback. It's a case of innovate or die. Let's not forget that 15 years ago, Apple was two months away from bankruptcy. You know, the late Steve Jobs would be looking down at all this and saying, wow, my company is so huge that it has an embarrassment of riches. Really, the only reason that Apple is coming out and paying this is to placate a handful of shareholders and the press, so Tim Cook doesn't have to deal with this question conference call after conference call.

After all, the stock is near all-time high. It's worth more than any other company in the world. It's not like they need to genuflect in front of a whole new set of investors and beg them to come on board.

SIEGEL: How much of that stockpile of cash at Apple or the smaller stockpiles at other big companies, how much of it has to do with tax policy and parking money overseas because if it were repatriated, they'd have to pay taxes on it?

FARZAD: There is a certain amount of that. For example, Apple has close to 60 percent of its cash pile, it's on track to have that this year overseas. And you have to - you get docked if you want to repatriate that back home, so that is obviously a consideration. But you look at Apple's nemesis, Microsoft, it's not as easy for Microsoft to go out there and pay a huge dividend because it's really tantamount to them to admitting defeat.

They really have to figure out whether they want to give money back to investors and call it a day or if they're going to make one or two more really good tries at innovating new products to catch up with Apple. And similarly with Pfizer. Pfizer was a company that 10 or 15 years ago was innovating, had a really impressive pipeline of pharmaceutical products. Now, it's just been acquiring other companies for the past five, six, seven years.

And, you know, there's almost the stage of - you remember Elizabeth Kubler Ross' stages of death and dying and there's some companies that are in denial and in acceptance. And to the extent that you're going to pay out a lot of cash, it could signal to the world that you're no longer an innovator. And so I think many CEOs are leery of just handing the money over.

SIEGEL: So is what Apple has done a statement of confidence, the confidence that Apple has in Apple or is there any greater confidence about the economy as a whole that might be some sort of a model for other companies?

FARZAD: Really, Apple, my impression is they were looking to flick off people who were bothering them. Like kind of - here, I'm throwing you a bone, just get out of my way. This is not a transformational event. Yes, the stock was up 8 or $10 today, but the majority of what Apple's going to be doing going forward is still innovating, is still plowing back its cash flow into new products, taking on the world in all these different ways.

And at the same time, banking a lot of cash. So if anything, this is only going to become a bigger embarrassment of riches for them because they're paying out a fraction, I think, of what they're going to be taking in as this company gets even bigger.

SIEGEL: Robin Farzad, senior writer for Bloomberg BusinessWeek. Thanks a lot, Robin.

FARZAD: My pleasure. Transcript provided by NPR, Copyright NPR.

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