Apple Inc. (AAPL), Microsoft Corporation (MSFT): U.S Firms Are Finally Giving You Cash – Take It!

Obviously, such large dominant companies shouldn’t trade at such low multiples. It’s the cash that’s hurting their valuations.

Looking forward

Finally, things are beginning to change. Firms have realized that hoarding cash hurts their market valuations. Apple Inc. (NASDAQ:AAPL) was the first one to take action. The company raised $17 billion in debt, and announced that it would increase its annual dividend by 15% together with a massive $60 billion share buyback program, up from a previous $10 billion. A few weeks ago, Oracle also reacted and doubled its annual dividend to 12 cents. In addition, it announced an 85 million share buyback program. Cisco has just upped its dividend payout by 21%, to 17 cents. With Microsoft Corporation (NASDAQ:MSFT), things are less clear. The company has yet to announce any meaningful news on this cash issue, although it seems that the stars are finally aligning. A few months ago, ValuAct, an activist hedge fund, bought a $2 billion stake in Microsoft Corporation (NASDAQ:MSFT) with the anticipation of implementing the same trick that Einhorn pulled with Apple Inc. (NASDAQ:AAPL).

The Fool looks ahead

Cash hoarding destroys value. That’s why U.S firms are finally beginning to part with their cash. Greater dividends and larger share buyback programs are now in place. I recommend you position your portfolio accordingly.

Shmulik Karpf has no position in any stocks mentioned. The Motley Fool recommends Apple and Cisco Systems. The Motley Fool owns shares of Apple, Microsoft, and Oracle. Shmulik is a member of The Motley Fool Blog Network — entries represent the personal opinion of the blogger and are not formally edited.

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