They have a lot of money in the bank in part because they don't pay dividends.

If Intel had kept all the dividends in the past 5 years, they would have billions more in the bank.

Apple also has a big chunk of their cash "overseas", they keep lobbying to have a tax holiday so they can bring the money back to the US without paying taxes.

@Peter48

'This sort of behaviour encourages unrealistic and unethical trading habits, punishing and rewarding companies not for doing a good job and earning a good profit '

True. Except, in Apple's case, it has encouraged the exact opposite

Peter 47 whined: "which _should_ also entitles you to sharing in the profits"

should? according to whom? according to just you. certainly, not according to any part of the financial markets, their regulators or the legal system. and i think they probably ought to know more about the subject than you do.

buying a share is a gamble. just because you bet on red doesn't mean the ball on the roulette wheel should land on a red number. you just hope it will.

you buy a share and you hope to take part in the companies success. you're not entitled to anything. if the share price tanks, are you going to put your hand into your pocket and help the company out, share in the losses? no, you're going to whine about the crappy investment (which was your choice).

the only thing buying a share entitles you to is that, if you sell it in the future, you'll get the market price for it, which may or may not be above what you paid for it.

grow up and get a clue

Wrong dividend

Apple did pay dividends but they stopped paying quarterly like everyone else back in 1995. Since then there has been a "dividend" paid out in 2000 and again in 2005 in the form of a 2:1 split. Personally, I prefer the stock split type of dividend because it keeps the per share price reasonable allowing for greater control in allocation and that is especially true for those just starting out with a small portfolio.

Then again, I can certainly understand the shit or get off the pot sentiment toward a cash pile that is nearly a quarter of Apple's market cap. Who knows, maybe if they can hang on to the "mine is the biggest in the land" title for a quarter it will make them happy.

. <-- the point you missed

> You do realise that the whole point of a share is to claim part ownership of the company, which should also entitles you to sharing in the profits.

But that's the whole point. With or without a dividend you _do_ share in the profits. Ignoring the market predictive aspect of share prices, the value of one share is roughly the assetsof a company divided by the number of shares. By not giving a dividend you inflate the tangible assets, so share prices rise. If you pay a dividend and the company isn't growing the share price doesn't rise because the asset value of the company is lower.

So rather than getting a 1% dividend keep the cash, and your shareholders can sell 1% of their shares, and you end up pretty much in the same place.

Indeed, in a weak market companies like cash, as it is a nice safety net (abeit a rather huge one in Apple's case). One reason why so many big companies have died in the last 5 years is that the spent/dividended all of their cash during the good times, so they have no safety net during the bad ones, and hence run out of cash and have to go running for loans which don't exist because the banks have _also_ run out of cash.

So which one is morally bankrupt? The company which is financial stable, immune to market shocks, and able to return a reliable investment though good times and bad, or a company which gives out short term dividends at the expense of long term stability, but in reality creates no extra value for it's investors (because they could have just sold the shares).

@Peter 48: You were doing okay until the end.

The reason most American companies DON'T pay dividends is bad tax law. If you make a profit as a company, you pay anywhere from 30-50% of the profit in taxes. Then when you issue it as a dividend, the recipient pays another 25%-50% on taxes. So it is more effective to retain the profits and grow the company to increase the share price of the company. This leads to the bust-boom cycle you see in our markets. If companies could pay dividends without taking the initial tax hit, you'd see more "rational" behavior from companies. You might even see it if they didn't have to take the second tax hit. Except of course most people prefer to bitch about someone making $40+ million of income on $250 million+ of investments paying too little in taxes.

not to quible on the numbers

but it's 15%. Dividends are covered under capital gains, which is 15%.

This is actually widely known in the US right now, as it seems like it will be an talking point in the upcoming presidential election.

(you are correct in that it is generally considered to be double-taxed though, once at the cooperate level and once as capital gains)

They could use the Aussie system

Austrlaia has a working system to avoid the double taxation of dividends. Companies still have a choice of whether their dividends are pre- or post- taxatiion (or any mix thereof). The post-taxation component carries that tax paid to the dividend recipient. It's not that hard.

No, my ranges reflect actuals.

You're only quoting the FEDERAL tax on dividends and capital gains. I'm including STATE and LOCAL taxes, hence the ranges instead of a fixed percentage.

And it's not a talking point, its a fundamental issue.

Capital gains in the US

Again another example of how screwed up is the US tax system. Why are capital gains taxed at a different rate to income? There's no good reason.

cash is king

They've got no more products besides a dated phone and a slick tablet. Best keep the cash.

Hmmm. What is a share?

Sorry, (apple) pie in the sky. The shareholders own Apple. So the shareholders own all that lovely cash. It's one of the reasons that Apple have got such a high market cap. Which means you can't buy the company off the shareholders with their own money.

The way to get expensive companies for cheaps, is junk bonds. So the Glazers bought Man United for under £100m of their own cash, and the rest borrowed, which debt they loaded on the company. Slowly, as they pay off the debts, if they can manage to keep re-financing it, then they get to own the company for relatively little risk. The reason this works, is that the shareholders sold ManU too cheap - i.e. the shares were under-valued.