Analysis: Apple’s $66B Cash Stash

Apple's cash holdings are growing at a rapid pace. Source: Asymco

Some analysts have used adjectives like “Excessive”, “Enormous”, and “Utterly Ridiculous” to describe the mountain of cash that Apple has accumulated.

During Q2 2011, Apple added another $6.1B in cash to their coffers, which now totals a whopping $65.8B.

Just how big is Apple’s cash hoard these days?  The folks at Asymco did some great research which really puts things into perspective.

  • “The funds are big enough to place Apple’s CFO office in the top 100 largest fund managers in the world and larger than any hedge fund manager.”
  • “Cash growth in one quarter was higher than the market cap of many companies. For example, if pre-payments were added back, the cash increased by about the market cap of Motorola Mobility.”
  • “Current cash is worth more than Nokia, RIM and Motorola Mobility’s market caps, put together.”
  • “Apple’s cash is worth half of Google’s enterprise value.”
  • “About two years ago, in January 2009 the stock traded at a price of $78 with at least one analyst placing a target of $70 on the stock. Today Apple’s cash is worth $70/share.”
  • “If you owned $100,000 of Apple stock, $19,000 of that would be cash and only about $80,000 would be “at risk” capital.”
  • “If Apple had no revenues, the current cash would sustain operations (SG&A and R&D) for over 7 years or until the middle of 2018.”

Although Apple has such a huge excess amount of cash, Steve Jobs and Apple’s management team has been reluctant to return any amount of cash to shareholders in the form of a dividend.

“We know if we need to acquire something, a piece of the puzzle to make something big and bold, we can write a check for it and not borrow a lot of money and put our whole company at risk..”
– Steve Jobs

Thats all well and good Steve, but with a $66B warchest, you could buy up the entire iPad/iPhone supply chain and still have some cash left over.

At what point does Apple’s ridiculous cash balance start to deter investors?  I think we have already reached that point.

“Now that Apple is trading at a discount to the overall market, it’s easier to argue that Apple is being penalized for holding onto its cash,”
-Yair Reiner, Analyst, Oppenheimer & Company

This tweet from from a very astute investor, tradefast, really sums it up.

If a company has no productive use for their excess cash balances, it should be gradually returned to their shareholders who can find productive uses for this capital.

As Apple shifts from a growth company to more of a large-cap mature technology company, it makes sense to revisit the dividend policy.  The majority of Apple’s competitors pay out dividends and they are holding even less cash than Apple, so why should Apple’s dividend policy be any different?

At this point, paying a dividend would make a lot of sense for Apple and their shareholders.  Even after paying out a dividend, Apple would still plenty of cash remaining to fund growth, new projects, or even a major acquisition.

The information in this blog post represents my own opinions and does not contain a recommendation for any particular security or investment. I or my affiliates may hold positions or other interests in securities mentioned in the Blog, please see my Disclaimer page for my full disclaimer.

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