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Apple's Dividend Strategy Divides Investors

Stocks in this article: AAPL MSFT CSCO IBM

Brand explained that Apple could easily hold some money back for acquisitions and future growth, while still rewarding investors. A share buyback, as opposed to a dividend, would be the best approach, he added.

"The buyback would be immediately accretive to earnings per share, which would boost the stock price, whereas a dividend would push the stock down by the value of the dividend," explained Brand, who writes the Peridot Capitalist blog. "A negative for shareholders is also that the dividend is taxable."

Dividends are nonetheless becoming more common in the tech sector. Networking giant Cisco (CSCO), like Apple, is famous for steering clear of dividends, but Cisco is planning to offer a dividend at some point in the future. Software giant Microsoft also reversed its dividend stance and made its first payment in 2003.

Not all Apple investors, though, think that this is the best way for the company to go.

"What I would like to see is Apple using its capital to extend its product line," Michael Yoshikami, chief investment strategist at YCMNET Advisors, told TheStreet. "I would rather have them invest the money for me than give me a dividend that I invest in a savings account, making one tenth of a percent."

Yoshikami explains that more mature companies tend to offer dividends.

"Cisco is further along in its lifecycle than Apple and Microsoft is a fairly mature company," he said. "It just doesn't seem to me to be the right time for Apple to be giving dividends."

Sure enough, tech's best-known dividend payer is also one of the sector's oldest names. IBM's (IBM) board recently increased the tech giant's quarterly dividend to 65 cents a share. With the dividend payment, which will be made this week, IBM will have paid quarterly consecutive dividends every year since 1916.

More on Dividends
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Apple, however, is a very different animal to IBM, and needs money to fuel its phenomenal growth, according to Yoshikami. A cash haul of more than $40 billion might seem like a lot of cash but is crucial to the company's future, he added.

"Frankly, Apple is a company that likes to have a lot of flexibility, and that amount of cash in the bank gives them all the flexibility in the world," explained Yoshikami.

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