Taxes On Capital Gains, Dividends, Blamed For Investors Fleeing Apple Stock


Can you hear the whistling sound?
Can you hear the whistling sound?

What goes up must come down, in physics and in investment. Stock prices for Apple have hit a low recently, down about a fourth of it’s value. Analysts believe that upcoming taxes on capital gains and investment dividends have stock holders rushing to get rid of as much as they can to avoid record tax hikes.

“No individual investment can defy gravity,” said the deputy chief investment officer for Wells Fargo, Erik Davidson.

Apple hit a high of $705.07 per share last September, according to Reuters, but now is running at around $526 per share, an even larger decline than the one seen in the S&P 500, which is down about 7 percent for the same period of time.

“Some of the selling is being driven by these tax decisions, but the flip side is there is not a lot of buyers because the buyers are procrastinating to see how the negotiations come out,” Bucky Hellwig, senior vice president at BB&T Wealth Management, told Reuters. “You probably have an inordinate effect to the downside because of these tax strategies.”

While the declines have taken Apple market capitalization down a little more than the full value of Coca-Cola (about $170 billion), Apple is still worth about $493 billion, which is $100 billion more than the second place Exxon Mobil.

With a highly valued stock like Apple’s, many investors may be feeling insecure about possible future hikes to the capital gains tax as part of the US government’s move to avoid what’s being called the fiscal cliff. Because Apple’s stock gained so much value very recently, many Apple stockholders will possibly face steep taxes on their capital gains from this past year.

Currently, the tax rate on dividends or capital gains is at 15 percent. It’s possible that successful investors might see a rate of up to 35 percent if the tax cuts expire and revert back to being taxed as ordinary income at the end of this year.

“If you’ve got all these gains – which a lot of Apple investors have because it’s done very, very well – then you’re going to see selling in the likes of Apple and other companies that have had good runs,” said Well Fargo’s Davidson.

Source: Reuters

  • ehutchins

    The goal on capital gains is to move them to 20%. This is not the reason for recent APPL volatility/drops. “No individual investment can defy gravity..” – Exactly. Cry me a river.

  • Vicente

    This entire line of reasoning strikes me as idiotic. If it’s deathly fear of capital gains taxes, apply it to ANY company not just Apple. In a larger sense, nobody would sell NOW if they thought the long-term payoff was going to be good, just to save a few percent on a tax bill. Only TRADERS and others who change stocks as often as underwear are that short-sighted. Capital gains taxes NEED to be higher, as there is nothing more destructive than all this trading activity, It feeds and enables financial middlemen who contribute nothing. Raise capital gains back to same as bottom bracket income tax rate, then investments will be about IMPROVEMENTS and not about shell-games and balance sheet crookery to turn a quick profit.

  • gumguy12

    This is EXACTLY the reason why this and many other stocks are dropping…period.

  • roblef

    This entire line of reasoning strikes me as idiotic. If it’s deathly fear of capital gains taxes, apply it to ANY company not just Apple.

    The original article makes the point that Apple is a high-end company that just made its investors a TON of money, and it (and other companies that have done it this year) makes sense that investors will try to get out now so that they’re not hit by a huge bill come tax time.