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Investors To Apple: Will You, Won't You - Pay Me A Dividend?

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In charting the history of Apple Inc. (AAPL), investors of course focus on the key product launches and the amazing rise in its stock price in recent years. However, some investors may have noted, perhaps with a growing lump in the throat, that December 15, 1995, was the last pay date for a dividend issued by the Silicon Valley giant.

The question of renewing the dividend, which has become more acute as the company amasses a cash horde, is less about what to do with its mounting reserves and more to do with what kind of company Apple sees itself in the post-Steve Jobs era.

The rise in Apple's stock price in the last decade has silenced any calls for a dividend during the amazing run of its iPod, iPhone and iPad products. Since the last dividend in 1995, at roughly five year intervals, the company has twice split its stock, resulting each time in a doubled share volume.

A day after the second split in 2005, Apple's stock price was $41.67 per share. In the nearly six years since then, the price has gone up tenfold and beyond, to the giddy levels of nearly $500 per share.

While investors are no doubt thrilled by this spectacular growth, they are also ogling the company's swelling store of cash. As of December 31, 2011, Apple's cash and cash equivalents totaled $10.31 billion. This begs the question: on what will the company spend this amount?

Analysts get into the bread-and-butter of the issue straight away - cash in hand allows Apple to target growth through, for example, acquisitions. On the other hand, although dividend payouts might make the stock more attractive to investors, it might equally indicate that the company is short on expansion ideas.

Then again there's the little detail of parking money on tax-friendly shores, a move not uncommon at all, and one which allows companies to avoid paying heavy corporate taxes -nearly 35 percent according to one estimate- in the U.S.

The notable fact of Apple's dividend-paying era is no doubt the absence of Steve Jobs. In 1985, Jobs left Apple in the aftermath of a power struggle between him and then-CEO John Sculley. Two years later, in May 1987, the company declared a dividend of $0.06 per share, and by 1991 had doubled this.

But then, in a phase during which Apple was criticized as "one of the worst-managed companies", the dividend flat-lined, and stayed at $0.12 per share until it was scrapped.

It was during this torrid juncture that Apple was nearly acquired by Sun Microsystems. They had also tried to come out with their own version of productivity tools similar to Microsoft Corp.'s (MSFT) Office range of products, besides licensing the Macintosh OS and ROM to the "clone" market.

Jobs' return came through the acquisition of NeXT Inc., and this eventually led to the evolution of the Macintosh OS X from NeXTstep. As is now well-known, the subsequent years saw the shift to a greater variety of consumer electronics, most notably the iPod and iPhone.

Crucially, Apple also successfully employed a direct marketing strategy, which originated from third-party retailers not displaying Apple Products as prominently as competing products in the 90s. This was coherent with the earlier company strategy when Sculley had been CEO, and also, arguably, one of the reasons Jobs brought Sculley over to Apple from PepsiCo.

Sculley himself had remarked in an 1997 interview in the British newspaper, the Guardian that Apple was "the marketing company of the decade." More recently, in 2007, Apple underwent a name change and became Apple Inc. from Apple Computer Inc., to underline the idea that Apple made much more than computers.

As analysts aver, Apple is now among the most recognizable brands worldwide. And there is brand loyalty too, as evidenced by "fanatic" crowds at store openings and product launches, a phenomenon one commentator likened to an "evangelical prayer meeting". To these die-hard "Apple evangelists", it's the brand and the product - most are probably not Apple stockholders.

The question that the company faces now, aside from the media buzz, is whether its investors subscribe to a notion of loyalty similar to the buyers of its products. Between Sculley and the incumbent Tim Cook, Apple has been under the unbroken reign of Steve Jobs. In a post-Jobs universe, perhaps, there is need for reassessing the investor's perspective.

Analysts span both ends of the spectrum - one voicing the view that Apple should think of a "variable dividend", while another sees an Apple dividend as a red flag at which any stock held should be sold off.

Cook has publicly admitted being not as "religious" as Jobs about maintaining cash reserves. However, this does not translate to an intention of paying dividends - the last word on that is yet to be said or written.

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