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Apple Inc. (AAPL): How Much Returning Cash Really Matters: Research In Motion Ltd (BBRY), Google Inc (GOOG)

Apple has more than enough cash from operations to fund a small dividend increase:

3/31/2012 6/30/2012 9/30/2012 12/31/2012
Net Cash From Op Activities 31,531.00 41,720.00 50,856.00 23,426.00

Data Source: Kapitall.com

Conclusion

If history could be used as guide, Microsoft would best illustrate why dividends do not matter in improving the share price of a company. Microsoft shares have remained range-bound after the dot-com crash. Yet when Microsoft began paying dividends in February, 2003, shares still remained range-bound. Fundamentally, the software giant found itself stuck in the PC market, unable to find its position in the mobile space to extend its growth.

For Apple Inc. (NASDAQ:AAPL), the situation is vastly different than that of Microsoft. Apple generates extraordinary profit margins. Investors are voting against Apple at this time because they anticipate competition from Android will erode these profits.

Source: @asymco

The short-term decline in Apple shares is frightening for investors who bought shares in the last year. Apple shares could be reverting to the mean as it gives back some of the extraordinary gains made over the last several years. A dividend increase rewards investors and encourages them to hold shares, rather than to speculate on them. The cash returned to investors in some form will benefit long-time shareholders.

For short-term speculators, Apple Inc. (NASDAQ:AAPL)’s valuation will likely be restrained by chronic worries of competition, no matter what innovations the company introduces to its iPhone or iPad. Apple needs to announce something bigger than that to appease speculators.

The article Apple: How Much Returning Cash Really Matters originally appeared on Fool.com and is written by Chris Lau.

Copyright © 1995 – 2013 The Motley Fool, LLC. All rights reserved. The Motley Fool has a disclosure policy.

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