From an investor point of view, would you prefer Apple to buy back its shares or else pay dividends? Explain your reasonin

Assignment – 2

Purpose

The final assessment is worth 50% of your final mark and is 3,000 words (plus or minus 10%).

The assessment consists of a written report. Ensure you read the following brief and instructions thoroughly.

Written report

The purpose of this assignment is to evaluate the dividend and payout policy (plus related issues) associated with one of the most prominent companies nowadays: Apple. As a start, please read the articles available through the links below:

Melloy, J 2017 ‘Apple now pays the biggest dividend in the world, surpassing Exxon’s payout’, CNBC Markets, May 2, viewed 10 October 2018, https://www.cnbc.com/2017/05/02/apple-now-pays-the-biggest-dividend-in-the-worldsurpassing-exxon.html

Heath, T 2018, ‘How rich is Apple? Its recent stock buyback is more valuable than 275 companies on the S&P 500’ Washington Post, May 3, viewed 10 October 2018,

https://www.washingtonpost.com/news/get-there/wp/2018/05/03/how-rich-is-apple-itsrecent-stock-buyback-is-more-valuable-than-275-companies-in-the-sp500/?noredirect=on&utm_term=.8887b980f3e1

Based on the articles above and the theories/concept explained in Topic 6 (“Payout policy”, Chapter 16 of the textbook), address the following questions:

a) How the increase in dividends paid by Apple since 2012 can be interpreted? Explain the potential risks the company might face when deciding to increase dividends.

b) Which are the factors behind Apple’s decision to choose for a specific payout policy (i.e., dividends vs share repurchases)? Elaborate on the implications of both in terms of the informational content/prospects related to Apple’s future outlook.

c) From an investor point of view, would you prefer Apple to buy back its shares or else pay dividends? Explain your reasoning.

d) Using the model set out in page 418 of the textbook (‘Stock Repurchases and DCF models of share price’), calculate the theoretical price of Apple’s share price. Would you recommend buying the stock?

Requirements

  • The required word length for this assessment is 3,000 words (plus or minus 10%).
  • In terms of structure, presentation and style you are normally required to use:
    • AIB standard report format
    • AIB preferred Microsoft Word settings
    • author-date style referencing (which includes in-text citations plus a reference list).

These requirements are detailed in the AIB Style Guide.

  • For the final assessment, the reference list is required to contain 6–12 relevant references from different sources. No references are required for the reflective practice part as this will include your own reflection.
  • All references must be from credible sources such as books, industry related journals, magazines, company documents and recent academic articles.
  • Your grade will be adversely affected if your assignment contains no/poor citations and/or reference list and if your assignment word length is beyond the allowed tolerance level (see Assessment Policy available on AIB website).

Grading criteria

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