While Apple’s plans announced today to return billions to its investors via share buyback and dividend actions are critical news, they are hardly revolutionary. In fact, the news underscores the fact that Apple, in this specific area, has been lagging its wealthy peers for some time.
In August of 2011 TNW highlighted the ten richest technology companies, based on their cash hoards. The ten companies had a combined market capitalization of $1.445 trillion and cash on hand of $290.89 billion. Those numbers have only risen since that post was written.
Apple, unsurprisingly, was atop the list, leading the tech firm elite in terms of cash on hand. Now, the company is sending a chunk of that cash (more on that in a coming post) to its investors. What’s interesting is that of the ten richest tech firms, only three did not pay a dividend before today. Now, post Apple’s decision, that number has shrunk to two.
This leaves Amazon and Google as the only two of the ten richest tech companies that do not regularly distribute cash outlays to their owners. Before Apple announced its move, I suspect that it was simple for the two companies to explain their non-payment to investors: Apple doesn’t, and they have more cash than we do. Besides, we’re investing in our business!
But now, with Apple dropping $45 billion into its new program, and the club-of-no-dividends shrinking by a third, it’s hard to imagine that pressure won’t pick up on Amazon and Google to begin sending some of their piggy bank back to their investors.
Apple could have just spoiled their frugal game.
What sort of argument that can be mustered to insist that these wealthy companies can’t afford any sort of dividend at all is difficult to imagine. The only defense that I can summon is the ‘we’re different’ strategy, by which Google states that it’s a unique corporation, and therefore will not follow normal market rules. If investors will allow it that luxury is a question that time will answer. Amazon, a company that is poor (ha) in comparison to Google will likely have a less difficult time of it, pointing out that of the top ten, it rounded out the pauper end of chart, coming in at 10th position.
Still, tech is all grown up now, and that means that even its hotter, newer players might have to fall in line and obey the old rules.