Dividend Policy Essay Example | Topics and Well Written Essays - 500 words

Dividend Policy - Essay Example The news report also cited a clause in the lawsuit, which states that Greenlight is voting AGAINST Proposal 2 in Apples proxy, which would eliminate preferred stock from Apples charter. The Proposal 2 bundles several proposals regarding how preferred stocks are issued at Apple. Apple responded that the charge is not appropriate, with Greenlight grossly misrepresenting data, which formed the basis for its own proposal. Based from the report, the dividend payment appears to be a form of extra or special dividend, which is paid during a period of high earning (Chapter 18). The success of its products, notably the iPhone and the iPad, saw the meteoric rise of Apple’s stock price, peaking at about $700 in September of 2012 (Molina). As a result, the company has a lot of cash on hand. Indeed, according to Apple it is distributing $45 billion within the span of three years (Molina). However, unlike most dividends under this category, Apple opted to follow quarterly payments, which is the most common practice among companies (Chapter 18). The decision to pay shareholders with dividends was only introduced after Steve Jobs’ death, after Tim Cook assumed leadership. Apple has been notorious for its policy of holding out on its cash hoard (particularly during Jobs’ tenure), and refusing to pay dividends to its shareholders. This dividend policy is, of course, justified. Apple has been known to spend much of its cash on research and development. This can also be attributed to the fact that dividend reduces the value of the firm (Chapter 18). Also, dividends are considered to be irrelevant as a policy. The reason for this is that â€Å"investors will not pay higher prices for firms with higher dividends because they do not need it to convert shares to cash† (Chapter 18). It was only last year that Apple changed its position when the company decided to pay