Frager Factor

Sunday, March 30, 2014

The One Thing Apple Needs to Do to Revolutionize TV and The Deeply Entrenched Interests Who Won't Have It

What’s Apple been up to or not up to lately? Why is morale and traffic at the stores an all-time low? Why haven’t they made the $1000 plus forecast I made, nor launched the “Steve Jobs” “nuclear” surprise I’ve wrote about extensively last year?  This is yet another example of deeply entrenched interests, trying to defend an outdated business model against disruptive innovations. It’s the same reason American network operators charge an arm and a leg for their services compared to broadband in other countries. This can't last. 

On the Apple GoodNews front, Seeking Alpha writes:

Apple's Dividend Will Hit $20 Within 5 Years

  • Apple is buying back a little over 4% of its common stock per year, which could reduce the shares outstanding to 775 million within five years.
  • Dividend investors ought to benefit handsomely as Apple's payout ratio approaches 40% of profits, which still allows Apple to retain more profits than necessary to fund future growth.
  • The buyback program plus a ten percentage increase in the payout ratio would alone take Apple's dividend to $20 per share within five years.
Although there are a lot of Apple (AAPL) shareholders out there that are not satisfied with the company's share price in the $530s right now, the lower price has actually been a blessing for the truly long-term shareholders, because the lower prices serve to increase the effectiveness of Apple's stock buyback program.

When Apple began buying back shares in 2012, I was initially concerned that the stock buybacks would serve as a thinly-veiled guise to just mop up shares created as executive compensation, and I was also worried that Apple would buy back its shares at such a slow place, that it would make the share buyback program essentially a meaningless factor in explaining the company's per share earnings growth.

I've been pleasantly surprised so far to see that those concerns are misguided. The company has reduced its share count from 940 million in 2012 to 899 million by the end of 2013. That's a share count reduction of 4.25% in one year, which puts Apple in that "buyback royalty" category with Exxon and IBM... more





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About The Author: Owen Frager is an Internet marketing expert ready to help take your company to the next level.

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