![\"Post](\"http:\/\/www.credittrends.com\/blog\/wp-content\/plugins\/tweet-this\/icons\/en\/twitter\/tt-twitter.png\")
Apple share have now declined on the order of 12% from its highs set just couple of weeks ago.<\/p>\n
Meanwhile, the much anticipated share buyback and dividend has not helped–and for good reason. It is not the dividend or buyback that creates value.<\/p>\n
If, however, Apple’s Board is\u00a0desirous of changing the downward momentum while bringing in value investors, there is a solution, one which will certainly raise the multiple on its shares.<\/p>\n
While I am certainly not privy to what Apple may announce this evening during its earnings release, if I were advising the company-and their Board is now intent on distributing cash-the most logical approach would be to hold on to its current cash hoard of about $100 billion, and distribute 75% of prospective free cash flows, quarterly. A distribution of the current balance would not be expected to aid the share price any more than it helped Microsoft some years back-for good reason-a stock is worth the present value of prospective free cash flows. The current small dividend is not sufficient to bring in a new class of investors.<\/p>\n
Maintaining the current cash, with its pristine balance sheet while continuing to hold 25% of prospective free cash flows would permit the firm to pursue even the most aggressive of acquisition, partnership and expansion strategies. Giving shareholders 75% of future free cash flows equates to a dividend of about 4.5%, given estimated growth,\u00a0 and almost certainly propel the stock.<\/p>\n
<\/p>\n