Apple Might Borrow Money To Double Dividend Paid To Investors [Rumor]

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With AAPL stock in decline, investors are rioting to get a piece of Apple’s $137.1 billion cash horde. Greenlight Capital’s David Einhorn, of course, has been making waves with his lawsuit against Apple and his proposal that Apple issue an ‘iPref’ preferred dividend to investors; now, Morgan Stanley Katy Huberty has come out of a meeting with Apple CFO Peter Oppenheimer, apparently convinced that Apple will more than double its existing dividend to investors to 6%.

In a note to clients today, Huberty said:

“Our analysis,” she writes, “suggests Apple can match the S&P IT sector’s average FCF [free cash flow] payout of 68% if it returns $28B in FY13, implying a 6% total yield. High mix of international cash limited flexibility in the past but raising low-interest debt can help address this issue, in our view.”

I’m not a financial expert, but it appears that what she is saying here is that while Apple has $137.1 Billion offshores, it can’t easily bring that money to the United States to pay investors without being heavily taxed on it. Consequently, she believes that if Apple were to raise the dividends it pays to investors, it would do so by borrowing money at a low interest domestically. Which is an interesting situation Apple might find itself in: having to borrow money when it’s one of the wealthiest companies on Earth.

  • Derek Schlicker

    Borrowing to pay a dividend is usually the last nail in the coffin for a dying company. For a company such as Apple with more money in the bank than most (all?) of Africa, I have a really hard time justifying the incentive behind why they’d want to borrow anything to pay for a dividend. This is a dumb rumor and definitely a false one.

  • James Barnette

    @ Derek: Can you even read? This is actually a very smart move on Apples part. If the interest on the loan is lower than the taxes that you have to pay to being the money in only to pay it out to investor then it is Then you are saving money by borrowing the money rather than using you offshore money. With interest rates what they are today it is a no brainer. you are talking about paying like 15% in taxes vs. a couple points at most to barrow the money.

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John BrownleeJohn Brownlee is a Contributing Editor. He has also written for Wired, Playboy, Boing Boing, Popular Mechanics, VentureBeat, and Gizmodo. He lives in Boston with his wife and two parakeets. You can follow him here on Twitter.

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