Apple could buy all the gold in China, more likely to increase investor dividend

Karen Haslam
11 December, 2012
View more articles fromthe author

Apple has enough money in the bank to buy all the gold in China, according to a report.

China supposedly stores about 1,054 tonnes of gold, which has a value of roughly US$64.3 billion, writes Wyatt Investment Research analyst Jason Cimpl on ETFDailyNews.

Rather than purchase China’s gold, Cimpl suggests that Apple will pay a larger dividend to shareholders.

His theory is based on the fact that Apple now holds US$122 billion in cash and equivalents (as of September). This is US$25 billion more than it had in March. Cimpl predicts: “Because their cash balance has grown by more than US$25 billion in two quarters, management will increase the dividend next year or declare a special one-time distribution to benefit high tax bracket payers in 2012″.

As for how much more investors are likely to gain; he notes “every additional US$1 billion is enough to raise dividends by US$1 per share”.

Cimpl notes that many companies are expanding on current dividend programs “in order to stay attractive”.

He concludes: “Shareholders should expect Apple’s dividend distributions to grow at least as much as earnings do.”

Cimpl believes that Apple could have a cash balance of US$210 billion by 2014. Apple currently dishes out around US$10 billion in dividends each year.

AAPL recommended

Apple’s shares have been on a bumpy ride recently, losing nearly 24 percent from their all-time-high of US$705 during trading on September 21, and falling to US$583 on Wednesday December 5. However, Barrons have placed AAPL in its 2013 stocks list. Alongside Apple are Barnes & Noble, BlackRock, General Dynamics, JPMorgan Chase, Marathon Petroleum, Novartis, Royal Dutch, Viacom B and Western Digital. Forbes notes that last year Barron’s list yielded a 17 percent return compared to 12.6 percent of S&P500.

One report suggests that the recent high-profile interviews by Apple CEO Tim Cook suggest he is in “panic mode”.

One theory for the recent decline in Apple’s share price was that hope for an extra dividend ran out. Other companies had announced special dividends would be paid due to expectations of higher tax rates in 2013.

The fiscal cliff seems the most likely reason for the recent decline in value – capital gains tax is expected to climb 15-20 percent from January. Performance Trust Capital Partners Brian Battle said: “Depending on what happens with the [US fiscal negotiations], rates could rise next year or they could stay the same. They will not be lower, so if you’re an investor who has seen gains in Apple, it is better to take those gains this year rather than next.”

Another new theory is that hedge funds are dumping shares, a Forbes report points to Diamondback Capital Management that closed down last week “amid heavy withdrawals and an insider-trading investigation,” according to CNBC, were big holders of Apple.

Leave a Comment

Please keep your comments friendly on the topic.

Contact us