Carl Icahn is a tech investor's new best friend. The crusty old raider, who has a stable of younger technology-minded money managers, has been pounding the table demanding Apple CEO Tim Cook buy back $150 billion in additional shares.
Apple already plans to buy back $100 billion in shares, including $16 billion worth last quarter. Icahn probably pounded the dinner table he and Cook shared recently for their much-reported bread-breaking at Icahn's New York apartment. Apple's cash stash currently sits at $145 billion but only $43 billion is in the U.S., which is why Icahn wants to float bonds to cover a buyback.
Icahn says he has claimed a sizable stake in Apple, and he wants Cook to take advantage of low interest rates to issue bonds to finance the additional buyback. While Icahn is wont to wax aimlessly on CNBC about what a great company Apple is and how loyal its customers are, the activist investor probably does not care about Apple employees or the future of the Cupertino, Calif., company. He's looking for a quick killing before he's on to the next thing, which is what he does.
That's not to say that Apple -- or other big tech names, for that matter -- shouldn't return more cash to investors, whether in dividends or buybacks. But Icahn's interest in Apple is no different than his previous investments in other tech giants, such as Motorola and Yahoo.
By the way, giving back cash doesn't always lift stock prices. Microsoft has given back almost $200 billion, and its stock price has been mostly flat for more than a decade. Buybacks and dividend yields by the likes of Microsoft and Intel -- while hefty for tech companies -- still tend to lag below levels of other industrials of similar market-capitalization size, which isn't enough to move the needle for most investors because of the higher amount of risk inherent in the tech sector, says technology analyst Bill Whyman of ISI Group, a financial research boutique.
But that hasn't stopped tech companies -- especially more-established ones -- from increasing their willingness to part with some of their vast cash hordes. They're doing this by increasing their dividends and capital allocation plans.
Tech companies now return about $130 billion a year to investors in the way of dividends and buybacks. As a result, tech's dividend payout ratio has jumped 14% and doubled in size in the past two years. What's more, the number of tech companies that pay dividends has jumped 55% in the past year alone, according to Whyman's calculations. (continued...)
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