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Apple Investors Vent on Dividends, but What's Next?

NEW YORK ( TheStreet) -- Apple (AAPL - Get Report) avoided mentioning a potential dividend at its shareholder meeting on Thursday, despite the company's ever-growing cash haul. With nearly $100 billion in cash on its balance sheet, calls for Apple to share some of its wealth with shareholders are reaching fever pitch.

Many commenters and tweeters on TheStreet's blog of Apple 's shareholder meeting were clamoring for a dividend announcement. "There will be some news today IMO about div.......there have been too many comments recently [by] CEO and CFO to leave it on the back porch," wrote mjohnh.

"Most attractive part of a possible dividend to me is the possibility of the shares being opened up to more funds," added Joe, a sentiment which was echoed elsewhere in the blog. "With a dividend, plenty of funds will now be able to purchase shares of apple," explained a commenter called John. "Will it see 600 before year end?"

There has been plenty of talk that a dividend could spur institutional investment in Apple. In a research note released on Friday JP Morgan noted that Apple's stock remains underowned institutionally. "Of the 282 mutual funds indexed to the Russell 1000, a surprising 40% do not have Apple as a top 10 holding - this despite the fact that Apple is the largest stock in the Russell 1000," explained JP Morgan analyst Thomas Lee.

There's clearly plenty of appetite for Apple to rethink its cash strategy, as evidenced by a commenter called 'p' on TheStreet's Live Blog, who urged Apple CEO Tim Cook to be more forthcoming on the dividend issue.

In a recent poll conducted by TheStreet, some 70% of respondents said that Apple should start paying a dividend again. The tech bellwether made its last dividend payment in 1995.

However, the dividend brouhaha poses the question: "Do Apple shareholders have a legal right to the cash, and could they sue Apple to get it?"

A famous example of suing a company to pay a dividend occurred almost 100 years ago, when the Dodge brothers sued Ford Motors (F - Get Report) to try to extract a dividend.

In 1916, the Dodge brothers sued Henry Ford for keeping his company's cash, nearly $60 million (remember when $60 million was a lot of money?) and not distributing it to shareholders. Ultimately, the Michigan Surpreme Court ruled in favor of the Dodge brothers and forced Ford to declare a dividend.

The major difference, however, between Apple in 2012 and Ford in 1916 is that Ford was a closely held company, says Lynn Stout, visiting professor of corporate law at Cornell Law School.

"Essentially, corporate law reserves the right to say that if the board doesn't want to pay a dividend, the only recourse shareholders have is to replace the board or get them to change their mind," Stout recently told TheStreet. "Dodge v. Ford Motor still applied to closely held companies, but Apple is a public company."

She also explained that the Dodge v. Ford is frequently mis-cited, and is not applicable in this case.
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