- Transitioning to being a dividend company is a major life event for any company.
- Brand value, big margins and product success are a framework for dividend growth.
[Originally published on 4/27/2014]
I bought my first Apple (NASDAQ:AAPL) computer in 1984. It was the Mac Plus, the revolutionary computer that made popular the idea of icon based user interfaces. (Apple fans will likely know that Apple did not invent either the mouse or the icon interface. But there is a lot more to that story than I can get into here.)
Had I bought 100 shares at the same time I bought the Mac Plus I'd have paid about the same for the stock as the computer. (I'm not including software in this price.)
The stock, at the high for the year, would have cost me about $2,800.00 - again, about the price of the computer.
Over the years I've bought more Macs than I can even remember. So it is pretty clear that if I'd just matched each purchase of product with an equal purchase of stock I'd be, by my modest standards, independently wealthy.
So why didn't I do that? I'm stupid, clearly.
First, I'd defend myself by saying that I also was a fan of the Sony Beta format. As with Apple's products, I knew it to be a superior technology. I also believed that the failure of the public to recognize this and to be willing to pay the slightly higher price were just typical consumerism.
But I also believed that the field for personal computers was dominated by IBM on the hardware side, and Microsoft on the operating system side. (Buying those companies wouldn't have been all bad at that time, either.)
Clearly innovative companies that were early in the game had no absolute advantage. Compaq was early with portability. Tandy was just plain early. And so the story goes.
I feared that Apple would go the way of these companies, no matter how much I personally liked their products.
I bought a series of Apple computers over the years, up to the point where my company ran on about ten reasonably new Apples in 2008.
Conservatively I've purchased $30,000 worth of computers, not including iPhones, iPods, and iPads, since that first Mac Plus.
So why am I now buying my first shares of Apple?
Probably because I am wrong. I clearly haven't got the instinct for picking the right Apple, as it were.
But in fact, the company isn't the same Apple as it was under Steve Jobs. His genius is undeniable, and he clearly has a historic place in the history of capitalism.
But why now?
1. Apple has more cash on hand than the United States government, and just about any government in the world. (As of April 23, 2014 Bank of America claimed Apple has twice as much cash on hand as the U.S. Government.) Check out this from Breitbart -
2. Apple has massively good products. J. D. Power published, in May 2014, the following: "Apple ranks highest in overall satisfaction (for tablets) with a score of 830 and performs highest in all study factors except cost." Sounds good for shareholders to me. Also, Apple is the number two most valuable brand in the world according to Interbrand.
3. Apple's CEO, Tim Cook, has made a commitment to paying and growing dividends.
4. The Apple announced stock split may, and I emphasize, may, make the stock more appealing to the retail stock buyer and thereby increase its value, increase its volume, and make options trading easier for those of more modest means.
5. Apple appears to be on the verge of a long run of dividend increases making it a possible Dividend Monster.
In fact, given the company's unique history, would it surprise anyone if in twenty years it was the single best dividend stock in the history of the market?
That's a pretty "out there" suggestion. But everything about Apple has been "out there" since day one. Why isn't this idea at least possible?
I'll not predict such an event, but let's entertain the possibility that Apple may continue to succeed brilliantly for decades to come.
I'd suggest that there is only one reason that stands in opposition to this possibility: the unfortunate absence of Steve Jobs.
Jobs came back to Apple against all odds before and arguably, rescued it from the less visionary.
This time, as amazing as Jobs could be, he's not as likely to return. (Let's not argue about whether he'd support dividends or not.)
So Tim Cook's challenge is really the ultimate test of his vision and mission, and Steve Jobs' vision, melded together. Did Jobs build a company that not only put a dent in the world, but also might make Apple (let me be hyperbolic) the greatest dividend machine in history?
It could happen.