American Tech Shares

Lakeuk

I've always gone for shares that pay dividends, this I generally understand - I watch I few america tech shares like Apples / Google - these companies make massive profits yet have never paid out a dividend in over 15yrs - from this I struggle to understand why people hold these shares when the company gives nothing back to it's shareholders, do what's the deal?

Biggles

You don't think a company whose share price goes from a dollar or two to nearly $500 is giving anything back to its shareholders?

You'd rather have 10c a quarter dividend?

US shares don't tend to go in for dividends so much. It's fairly immaterial, really, they're only paying you your own money out of the share price. In the UK, I guess it could be an advantage if selling some shares would involve you paying Capital Gains Tax.

IronWolf

With the likes of Apple and Google, their excuse is that they want a lot of cash on hand for aquisitions, as they need to move fast to get emerging technology etc.

But Microsoft also had that excuse, until the shareholders got fed up with them having $50bn in cash just sitting in a low interest bank account and made them start paying a dividend.

I believe Google and Apple both have very high cash balances, so are doing nothing with their earnings really which isn't good for shareholders. Retained earnings are only good for shareholders if they are reinvested to enhance shareholder value, otherwise they're better being paid in dividends.

atypical

In July, Apple had more cash than the US government:
http://www.bbc.co.uk/news/technology-14340470

They now have nearly $100 billion:
http://www.reuters.com/article/2012/01/26/us-apple-cash-idUSTRE80P00K20120126

They can't just let it pile up. Even spending on acquisitions would hardly dent it. I think they'll eventually start paying a modest dividend.

IronWolf

I'm surprised shareholders have put up with it

Not paying dividends isn't always bad, for e.g. Berkshire Hathaway has never paid a dividend, but has Warren Buffett reinvesting all the earnings which builds shareholder value. Cash sitting in the bank doesn't.

In the US they are more into share buybacks, which have tax advantages over dividends. The disadvantage of this though is that if the share becomes overvalued (which normally you'd hope for to make more money on your investment) the share buybacks are actually disadvantageous because you're earnings are being used to buy overpriced assets.