Apple Holds Out on Dividends

SUSIE GHARIB, NIGHTLY BUSINESS REPORT ANCHOR: No dividend for Apple (NASDAQ:AAPL) shareholders. Investors were hoping that Apple (NASDAQ:AAPL) would announce today its first ever
dividend payment at its big annual meeting. With Apple (NASDAQ:AAPL)
sitting on $100 billion in cash, shareholders have been clamoring for a
dividend. This was the first question from the floor to CEO Tim Cook at the
meeting held at the company’s headquarters in Cupertino, California. Cook
responded, we’re thinking very deeply about the question. The board wants
to do what’s best for shareholders. Please have patience. Well, it looks
like investors are holding out — Apple (NASDAQ:AAPL) shares surged almost
$4, closing at $516 and change.

Our guest tonight thinks Apple (NASDAQ:AAPL) stock could hit $585 this
year. He’s Scott Sutherland, research analyst covering wireless for Wedbush
Securities. Hi Scott, nice to have you with us.

SCOTT SUTHERLAND, APPLE ANALYST, WEDBUSH SECURITIES: Great, thanks
for having me, Susie.

GHARIB: So what is holding Apple (NASDAQ:AAPL) back from paying a
dividend? Why the reluctance?

SUTHERLAND: I think maybe two things. One, there is a process they
have to go through. And I think they’re being very methodical about it. And
second I think historically Steve Jobs had been resistant to a dividend.
High profile, ..mentioned that he would rather have cash on the
balance sheet and possibly those two reasons are making them very
meticulous about this.

GHARIB: But even if Apple (NASDAQ:AAPL) paid a dividend, there would
be plenty of money left over. What are they going do with $100 billion in
cash?

SUTHERLAND: Yeah, I mean, plenty of cash. I think Tim Cook has said
it several times now in the last few weeks they have plenty of cash.
They’ve only done small acquisitions. They’ve built up the supply chain and
data centers so I do think they have plenty of cash. Not all of it is done
without– most of it is not but they still have plenty to pay dividend. I
think that’s going to be likely this year.

GHARIB: At the meeting today, what did Tim Cook say about new
products? As you know people are just waiting for a new version of the iPad
and the iPhone. What did he say about any of that?

SUTHERLAND: You know, they really never talk about new products.
Apple (NASDAQ:AAPL) is very secretive about that. They leave that to the
analysts and reporters like us. You know there were some questions about
the connected TV and video services, so they did talk a little bit about
that and about working with Facebook. But clearly we have all speculated an
iPad 3 will be coming out in early March, later this year, an iPhone 5 and
fully integrated connected TV which was already hinted at in Steve Jobs’
book. So I think those are three major products this year that we’re
looking for.

GHARIB: From what you have been hearing about the new TV, is it
going to be a game changer?

SUTHERLAND: I think this could be a game changer. I think what
really we should look at is not the $99 box but a fully integrated TV. A
lot has been talked about and how it changes the interface and user
experience. I think most importantly, any time Apple (NASDAQ:AAPL) brings
something out to the media world, and remember Apple (NASDAQ:AAPL) heritage
or Steve Jobs heritage in the media industry with Pixar, he understands
that model. I think they have the potential to change the way we consume
media through the TV set, the way we might purchase it. So I think that
would be the most interesting part.

GHARIB: There is a lot of excitement waiting for that and there’s
also still a lot of excitement about Apple (NASDAQ:AAPL) stock. Let’s talk
about it. So you have a target price of $585 on it. What do you say to
critics who say Apple (NASDAQ:AAPL) is overpriced even at $516 where it
closed today?

SUTHERLAND: Well, I think first of all the critics have been wrong so
far. Apple (NASDAQ:AAPL) showed accelerated earnings growth last quarter.
We could see them in 2013 well over $50 and you take out that cash of $100
billion and it’s trimmed 10 times net of that cash. So still very
reasonably valued. As long as earnings keep going up, valuation doesn’t
look that stretched. I think some people are just saying that stock can’t
go up this much or this long forever and large numbers will set in.
But so far, they haven’t and there is a lot of international and market
share growth for Apple (NASDAQ:AAPL) still to go for.

GHARIB: So for somebody who has not invested in Apple (NASDAQ:AAPL),
standing on the sidelines saying too late at this price, do you still think
it’s worth it to buy shares at this price?

SUTHERLAND: I think it can go higher than $585. I think they have the
platform in iCloud for the next 10 areas to build off all these connected
devices. They have single digit market share in mobile phones and PCs and
they’re just getting into the connected TV market. So I think there is
plenty of room for Apple (NASDAQ:AAPL) to go higher. I think it’s a nice
core holding for a blue chip investor.

GHARIB: OK. We’ll leave it there. Scott, thanks so much for coming
on the program.

SUTHERLAND: Great, thank you.

GHARIB: Real quickly do you own the stock, any disclosures?

SUTHERLAND: I do not own this stock and no investment banking
relationship with the company.

GHARIB: OK. Thanks for filling us in. We’ve been speaking with Scott
Sutherland, research analyst covering wireless for Wedbush Securities.


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