There’s way too much chatter about what Apple (AAPL) has to do with its cash position and not enough about Apple’s earnings. And I don’t even want to go into the idea of the stock split. If you really need a stock split to buy, move on. The idea of buying just a couple of shares worked for buying Berkshire Hathaway (BRK.A) decades ago when it traded at similar prices, and it can work now.
Why doesn’t the dividend matter in Apple and matter so much to me in Berkshire Hathaway? Pretty simple: earnings momentum. I was surprised at how little earnings momentum Berkshire has. Instead, Buffett focuses on book value. That’s all well and good if the company is willing to buy back stock to take advantage of its discount, a discount that Warren Buffett chatters about throughout his letter.
But Buffett chose not to buy much stock at all. I regard that as somewhat quizzical if you really believe that your stock is undervalued. Further, even more oddly, Buffett highlights the IBM (IBM) buyback as being a terrific one, even though IBM is clearly overvalued compared with Berkshire when it comes to book value. If the market cared about book value, Berkshire would be much higher. It doesn’t.
I have suggested here that if Berkshire wants to bring out its value and give shareholders a decent return, Buffett should give us a dividend.
So why do I not care about a dividend with Apple? Because I accept the dichotomy between a growth stock and a value stock.