When a company that is cash rich uses that cash to buy back some of their stock or begins to issue a dividend, how does that usually affect share price? Is it a "wash" or is share price usually affected. Any historical companies you know of here that went through this?
In my particular case I'm wondering about Apple, who said today (about 3 times in their earnings call) that they "are actively discussing the best uses of our cash balance." Because Apple isn't big on acquisitions (and very selective), the likelihood of the former I think is fairly high, hence my question.
People say the best thing Apple can do is "buy Apple", because 1/4 of their company valuation is cash (i.e. 100B out of 400B). So, with a company that has a structure like this ratio, perhaps similar to other companies in the past (ratio-wise), can you offer any insight on what typically happens to share price as this money is used to some extent for share buybacks or dividends? Is it a "wash" or is it boost for share price? Please note also unusual in Apple's case is an extremely low PEG ratio -- very low P/E, and an earnings growth rate now near 100%. People don't believe that rate can continue because of their large size, however because smart phone penetration is 5% world-wide, and the huge inroads they are making in the corporate and home PC space (with iPad and Macs), I think that growth rate is realistic for several years if it helps in the historical company cash-> buyback/dividend comparison, on which I have no background.