Nowadays,
in order to expand the scale and assets for company, the dividend is a useful
tool for attract investors to put their money in companies. The aim of all
investor to move their money is to achieve more wealth and they are not charity.
Therefore, dividend is the most direct approach to compensate the contribution
of investors and it is also able be creating value for company.
In the case
of ‘Apple profits fall for first time in a decade’, the Apple made a net profit
of $9.5bn in the first quarter in this year, which has been decreased from
$11.6bn last year. However, the dividend of Apple Inc. surprise rises up 15% after
they dropped profit. What makes this happened?
Before
analyze the reason of Apple raise their dividend up, it is necessary to know
about what is the impact of dividend. The dividend is usually effect the decision
from investors and it is also a basic resource to help investors make decision
about what company can invest and how much can put money in. Dividend is possible
to change to shares by the shares trading. However, the dividend policy is made
to restraint investors and protects creditors. For investors, the high
dividends are always good news and low dividends are bad news. However, in the
reality, the high dividends may imply a lack of attractive investments as
result of lower future investment returns, and the low dividends may indicate
many attractive investments as result of better future prospects.
The
Clientele Effect suggests that the stable growth dividends are the best way to
keep investors stay. This is because a very low dividend will make investors
lose their confidence and a very high dividend will make investors feel that the
unsustainable in long term. Therefore, the managers can maintain the dividends when
profit going down and raise little scale of dividend when the profit going up.
Back to the
Apple case, Apple made a lowest net profit around the recent ten year, but they
raise their dividend up. For my point of view, this decision is made very
correct and strategic. Relating with apple recent market situation, especially in
the smartphone market, Apple is always improving their old style phone after
iphone4 was launched. However, the competitor of Apple has launched many new
phones which have new design and new feature such as Samsung and HTC. The phone
industry of Apple is obviously losing the competitive advantage. The investors
are looking for the innovation in Apple and they trust that the Innovation of
Apple will bring more wealth. However, the net profit decreased is very
possibly led Apple to lose many investors. Apple is impossible to create
Innovation without investors’ supports. Therefore, the managers have to
increase the dividend to keep their investors and shareholder, and more, the
increasing of dividend is possible to attract more investors. They are the main
financial supports to Apple create new innovation. ‘The most important
objective for Apple will always be creating innovative products’ from The CEO
of Apple, Tim Cook, to calm investors’ fears.
