“Apple stock just popped on a rumor that the company will dig into its mountain of unneeded cash and issue a big fat “special dividend” to shareholders.
On the one hand, this is a positive: Apple should do something with the cash.
On the other hand, it’s a negative: Of the three most sensible ways to return cash to shareholders, a “special dividend” is the least flexible and least efficient.
The two other options are:
- Increase in the regular dividend (perhaps at least a doubling)
- A major stock buyback
Of these two options, the stock buyback is the most efficient and flexible option.
Why?
Because of dividend taxes.
Apple’s stock is owned by a lot of small, taxpaying shareholders.
These shareholders will get hit with up to a 23.8% tax on any dividends thanks to the recent tax increase…..”
If you enjoy the content at iBankCoin, please follow us on Twitter
