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3 Reasons Why Apple Shouldn't Pay a Dividend

Acquisition Strategy

Tech companies that tend to pay dividends have been seen as low-growth, lacking other alternatives for their cash, such as potential acquisitions.

In a recent interview, Sterne Agee analyst Shaw Wu said that Apple may eventually pay a dividend, but noted that the firm is likely to use its cash pile to purchase content for the upcoming Apple TV. "We hear that content is what is holding back the Apple TV," Wu said. Wu rates shares buy and recently raised his price target to $550 from $540 in light of the quarter.

With Apple having $97.6 billion in cash at the end of the quarter, $64 billion of which is overseas, the cash haul can be used for offshore acquisitions which will help the company, Ironfire Capital's Eric Jackson said.

Jackson noted that Apple tends to do smaller acquisitions, typically valued at less than $500 million. These acquisitions are usually transformative in nature, and help Apple's ecosystem. "Siri is a prime example of acquisition strategy that has helped Apple, as it has helped iPhone 4S sales," Jackson explained.

The most recent acquisition Apple did was that of Anobit, an Israeli flash-memory company.

Oliver Pursche, President of Gary Goldberg Financial Services and manager of the GMG Defensive Beta Fund said, "The big question for Apple looking forward is what they'll do with the $97 billion with cash. I'm not in the camp of them paying a dividend. Strategic acquisitions will continue to play a role in their growth strategy."

Interested in more on Apple? See TheStreet Ratings' report card for this stock.

Check out our new tech blog, Tech Trends.

--Written by Chris Ciaccia in New York

>To follow the writer on Twitter, go to http://twitter.com/commodity_bull.

>To submit a news tip, send an email to: tips@thestreet.com

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