Treasury to announce $25 billion profit on mortgage bonds: WSJ

Reuters – 22 mins ago

(Reuters) - The Treasury Department may announce on Monday that taxpayers have made a $25 billion profit on mortgage bonds purchased at the height of the meltdown, the Wall Street Journal reported.

Treasury had spent about $225 billion on purchases of mortgage debt over 16 months before it began selling the securities last year, the Journal said.

The government last week sold the last of the bonds, liquidating the Treasury's ownership of debt backed by Fannie Mae and Freddie Mac , the newspaper said.

Investors were worried about the movement of asset prices in the event of curtailment of government support.

"We said if we thought there was any stress in the market around this, we would pull back," Mary Miller, the Treasury's assistant secretary for financial markets, told the Journal.

"We frankly never saw that and just continued," she added.

The mortgage purchases were one of the tools employed by the U.S. government to prop up the financial system at the height of the credit crisis. Separately, the Federal Reserve had also rolled out its own programs to achieve economic stability.

Treasury Department could not immediately be reached for comment by Reuters outside regular U.S. business hours.

(Reporting by Sakthi Prasad in Bangalore; Editing by Ramya Venugopal)

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Apple to decide on its $98 billion cash pile

SAN FRANCISCO (Reuters) - Apple Inc said it would host a conference call on Monday morning to discuss the outcome of discussions about its cash balance as investors clamor for a return from its massive holdings.

Apple has $98 billion in cash and securities, sparking calls by investors to put the huge hoard to work. ISI Group analyst Brian Marshall said the cash balance equates to $104 a share.

Wall Street has increasingly bet that Apple will this year return cash to shareholders, taking their cue from Chief Executive Tim Cook's comments about "active discussions" at the top levels about the matter.

Cook recently said he had been "thinking very deeply" about investors' demands that the iPad and iPod maker return some of the cash to shareholders via a dividend.

"Frankly speaking, it's more than we need to run the company," Cook said at the annual shareholders meeting in February.

Analysts have said the return of cash to shareholders could take the form of a one-time dividend or share buyback to address a longstanding desire on the part of investors, while potentially opening the stock to a new class of investors who seek a dividend yield.

"A dividend makes sense," said Shaw Wu, analyst with Sterne Agee. The decision "is probably going to be pretty binary. It's going to be either yes or no. Many are hoping the answer is going to be yes.

"It's more likely they are considering it. I am not sure they are going to necessarily say it's to be effective immediately," Wu said.

On the alternative of a buyback, Wu said it would be possible, but the value to shareholders would be more questionable.

"The issue with (a) buyback is that the payback for investors is not as tangible. With a dividend, you get a check in the mail," Wu said.

Wu discounted the possibility of a stock split, saying it makes it more difficult to beat earnings consensus numbers.

Mounting anticipation over a buyback, along with hopes the newest iPad will keep sales momentum strong, helped propel Apple's stock to a record high this month past $600 a share and has made Apple the most valuable U.S. company by market capitalization. The stock on Friday closed at $585.57.

ISI's Marshall said a dividend would drive additional stock purchases from top 20 dividend mutual funds and other investors as they make Apple a top holding.

Marshall said a dividend could be as high as $14.65 per share annually.

The Apple call, to be held at 9 a.m. EDT (1300 GMT) on Monday, will not provide an update on the current quarter nor will it touch upon any topics other than cash, the company said in a statement on Sunday.

Apple declined to comment further on the press advisory.

(Reporting by Poornima Gupta in San Francisc and Jessica Hall in Philadelphia; Editing by Dale Hudson and Leslie Adler)

Dividends paid by companies hit record $263 billion

By Matt Krantz, USA TODAY

Updated

Dividend-hungry investors are finally getting their due, and in a big way.

• 

  Thinkstock

Companies are on pace to pay a record $263 billion in dividends to shareholders over the next year, topping the $253 billion they were paying as of June 2008, S&P Capital IQ says. Dividend payments are back to record levels even though stock prices, as measured by the Standard & Poor's 500, are still more than 10% below the peak they hit in October 2007.

"We're seeing good dividend increases across the board," says Richard Helm of Cohen & Steers Dividend Value fund. "Companies are running very profitable and cash-rich right now." Dividend payments setting new highs shows improving:

• COLUMN: Search for large dividend-paying stocks continues

• COLUMN: Finding stocks with the highest dividend yields

•Fundamentals of businesses. Coming off a banner year for earnings when profit at S&P 500 companies jumped 16%, Corporate America is sitting on a record of more than $1 trillion in cash. Investors have been clamoring to get some of that cash returned to them, says Robert Maltbie of Singular Research. They are getting their wish: The dividends to be paid out by companies this year are already 39% higher than it was in August 2009, S&P Capital IQ says.

•Health of banks. The biggest new driver for dividend growth is coming from the banks. Banks, which accounted for a third of the dividends paid out in the early 2000s, slashed them in 2009. That year bank dividends were just 9% of all dividends paid. But many banks are reinstating or increasing dividends after the results of last week's stress tests. Banks account for 13% of dividends, and that's expected to rise, says Kevin Shacknofsky of Alpine Dynamic Dividend fund.

•Returns for investors. In an era of low interest rates, dividend increases are vital for investors seeking rising returns, Helm says. S&P 500 dividend stocks have an average yield of 2.1%, which rivals the 2.3% yield of 10-year U.S. Treasuries. And analysts expect dividends to rise further. There's growth coming from sectors that traditionally haven't paid large dividends, such as technology, Shacknofsky says.

And companies can afford to pay more. They are paying out just 30% of their earnings as dividends, down from the 35% they've paid in recent years and 52% long-term average, Maltbie says. "Dividends are going higher," he says. "Investors are demanding it. They want cash."

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