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Everyone is bent on giving Apple's (Nasdaq: AAPL ) money away these days.
Bernstein Research got heads nodding last week when analyst Toni Sacconaghi urged the company to initiate a dividend, ideally saddled with an ambitious share buyback.
I don't have to travel far to find someone swinging a stick at Apple's balance sheet pinata this week. Motley Fool Income Investor advisor James Early is renewing the popular chant for Apple to yield more than just great products.
Apple has $45.8 billion cash and marketable securities, so it's easy to view Apple's top-heavy balance sheet with the eyes of a kid in a candy store.
Unfortunately, investors are forgetting a few things.
1. You can't buy pride, but you can give it away.
Sacconaghi has a bold plan. His open letter calls for a spunky $30 billion share repurchase plan. He also proposed dividends at an annualized 4% rate; that wouldn't get in the way of Apple's cash balance because it would represent only a fraction of the cash flow it is currently generating.
Let's take a closer look at the proposed buyback. Whether Apple invests $30 billion to eat its own shares or heeds others calling for a chunky one-time payout for the same amount, Apple's market cap could shrink by roughly $30 billion with either fewer shares outstanding or in the act of going ex-dividend.
Remember when Apple topped Microsoft (Nasdaq: MSFT ) in terms of market cap earlier this year? That situation could reverse. Apple's unspoken quest to overtake ExxonMobil (NYSE: XOM ) as our country's most valuable company by market capitalization would become that much harder.
Buyback fans can argue that the accretive move would lead to a higher share price as earnings are divided among fewer shares. It's a logical conclusion, but the larger cry appears to be for a market cap-deflating dividend push.
2. One-time ransoms are for quitters.
You know who wears the "I paid a special one-time dividend" badge? Losers, mostly. Recent slackers that have gone that route include goth retailer Hot Topic (Nasdaq: HOTT ) and meandering GPS has-been Garmin (Nasdaq: GRMN ) .
Does Apple want to run with that crowd?
Let's bring this closer to home. Microsoft paid a special $3-a-share dividend in 2004. Its stock was in the high $20s then. It's in the mid-$20s today. Gee, that really helped unlock shareholder value. Apple's stock has appreciated several times over in that time.
If one-time payouts are to catch on, they're going to need better role models.
3. Apple may still need the money.
It's true that Apple hasn't had much of an acquisitive appetite in the past. It's also true that Apple is unlikely to come into a greenback-slurping funk in the near term. However, you never know when an arms race is going to kick off.
Who are Apple's biggest adversaries these days? I would probably go with Microsoft and Google (Nasdaq: GOOG ) . Each of those companies has more than $30 billion in cash and equivalents on its balance sheet.
Why should Apple be the one to blink first? What if Apple cracked open the vault, only to have Google and Microsoft go on spending sprees?
4. Today's tech leaders aren't conventional.
As companies mature, a dividend is a natural way to replace growth investors with income-chasing shareholders bent on value.
Well, that's the way the companies in your father's portfolio went about their life stages. But Apple, Google, and priceline.com (Nasdaq: PCLN ) aren't playing by conventional standards. They're not going to pay out dividends just because they're making a lot more money than they're consuming. They don't split their shares just because they're trading well into the triple digits.
Leave Apple's billions alone. If you're buying into Steve Jobs' company, it better be because you think that he can make more sense of the company's greenery than you.
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