Open Letter to Apple Shareholders

In the long run we are all dead. Every company faces eventual destruction like this, the question is how long it takes and whether investors actually realize any of the residual cash flows along the way.

What is the equity value of a company? It’s what someone would pay to acquire the projected cash flows of the firm, net of its liabilities. It would cost a lot to buy Apple’s projected cash flows.

If dividends are paid, then the investor directly receives some of this cash flow NOW. If dividends are not paid, these get plowed back into equity, in which case the firm needs to grow rapidly in order to maintain return on equity and hence the valuation. When the (initially) heavily discounted future becomes “now,” the forecast turns down, and the price someone would pay for those future cash flows collapses. In the absence of dividends, equity holders have gotten nothing – even for the cash flows that were actually received in the interim!!! And as the inevitable approaches, the firm’s managers certainly have no incentive to distribute any of this to shareholders.

Want to take your profits? Sell your shares dummy.

Not to beat a horse that so many have valiantly flogged in the comments above, but Karl, investors like myself have already made quite a bit of profit from Apple, simply by investing years ago and selling when the stock traded at a price that induced us to trade. I bought about 40 or so shares at ~70 dollars, and sold my first 40 when it hit 200. I sold the remainder for less (it dipped back to about 178 a while back) because I needed some immediate cash.

I never once felt cheated.

I’ve since re-bought a few shares (only a handful; a bit less than 20) at ~330 a share, and am holding until 550 or a split. I’m confident in my investment and couldn’t care less that I’ve not received dividends on that investment. It has already paid for itself.

You’re delusional if you believe Apple will “fail” in any kind of short-term timeframe. They’ve got solid management, excellent resources (both monetarily and intellectually) and are capitalizing in ways that other companies could and SHOULD take lessons from.

The ONLY other company I’ve been as proud of in my investment has been Chipotle Grill, which I bought in at ~112 and am now riding high. I’ll be selling those shares very shortly and investing the proceeds into long-term mutual funds.

Couldn’t be happier.

So after some 15 years of take-the-money-and-run management at Apple that the company somehow managed to survive, and a decade-long recovery process that only began when they got people in who didn’t take the money and run, you start feeling betrayed because… you can’t take the money and run.

Have you learned nothing?!

Oddly enough, when I read the fake “plan” that the author seems to be ridiculing I thought it was the exact type of thing Steve would have wanted Apple to do… sorry if long term life of the company and technological leadership isn’t worth more than dividends.

Am I missing something here?

You are not a smart person. I hope you do not reproduce.

Look – a paid troll! Mr. Smith, you surely don’t think this works as satire, do you?

Eventually, if AAPL shares stop returning value to shareholders through share price increases, then it would make sense to offer dividends. But so far, that has not been the case for Apple.

The iPhone and iPads continue to increase dramatically in sales numbers. The iPad 3 is due to hit the streets in March 2012, and at some point this year the dramatically redesigned iPhone 5 will hit the streets (the last project Steve Jobs had a major hand in developing). Macs continue to increase sales numbers and their market share gains are increasing year to year. Apple will likely introduce a television this year–an entirely new market for Apple, (sarcasm) and it’s not like Apple has a history of redefining markets or being successful in them (/sarcasm). Apple’s P/E is extremely low, and in almost every market it plays in there is still a lot of upside and prospects for growth.

But, please–do blather on about dividends and how Apple is being unfair to investors and how they will eventually go out of business.

me thinks the article refers more to the newer investor buying in at the current price of AAPL. that further appreciation in stock price may become a slower and arduous process. bravo to those that have bought at prices <current price, and stand to gain much if said shares were sold. but the article clearly points to the dilemma of current potential investors. anyways, just saying reading in the context makes for better understanding. that's what SIRI told me.

Don’t know why everyone is calling Mr. Smith an imbecile. I don’t think his point is flawed, and I’ve had 20 shares of Apple in my portfolio for years now that have done very well for me (well, actually, they haven’t done anything at all for me, since I haven’t sold any of them, which is exactly Karl’s point). I’d own a lot more Apple right now if they paid any dividend at all. That profitable companies should pay out those profits in the form of dividends to the owners/shareholders of those companies seems axiomatic. If Apple (or every company listed on the NYSE, to remove the Apple fanboy rage component from the argument) never paid a dividend ever, then there would be literally no actual value in owning stock. If we’re not buying and selling shares of future earnings and current assets, then what the hell are we buying and selling?