Who Profits from Apple Profits?

By: Robert F. Abbott, author of Big Macs & Our Pensions: Who Gets McDonald's Profits?

January 28, 2014

A big day for the markets yesterday, as Apple announced, after the close, earnings for the first quarter of the 2014 fiscal year. Now that Apple has become the biggest dog in the corporate kennel, its results matter to a lot of investors.

And, they matter to a lot of people who don't even know they're part of the markets: working people who have invested in Apple through their pension funds and mutual funds.

Data from nasdaq.com indicates just over 60% of Apple's shares are owned by institutional investors, meaning mainly pension funds and mutual funds (including ETFs). In turn, many millions of working people, in both the public and private sectors, 'own' these funds.

Among those owners are members of the State Board of Administration of Florida Retirement System (with 1.6 million Apple shares at the close of trading on September 30, 2013), and State of New Jersey Common Pension Fund A (1.35 million shares as of September 30, 2013).

This quarter, which ended December 28, 2013, includes the all-important Christmas season. In announcing the results, the Apple news release sounded upbeat:

"The Company posted record quarterly revenue of $57.6 billion and quarterly net profit of $13.1 billion, or $14.50 per diluted share. These results compare to revenue of $54.5 billion and net profit of $13.1 billion, or $13.81 per diluted share, in the year-ago quarter. Gross margin was 37.9 percent compared to 38.6 percent in the year-ago quarter. International sales accounted for 63 percent of the quarter’s revenue.

"The Company sold 51 million iPhones, an all-time quarterly record, compared to 47.8 million in the year-ago quarter. Apple also sold 26 million iPads during the quarter, also an all-time quarterly record, compared to 22.9 million in the year-ago quarter. The Company sold 4.8 million Macs, compared to 4.1 million in the year-ago quarter.

"Apple’s Board of Directors has declared a cash dividend of $3.05 per share of the Company’s common stock. The dividend is payable on February 13, 2014, to shareholders of record as of the close of business on February 10, 2014.

"We are really happy with our record iPhone and iPad sales, the strong performance of our Mac products and the continued growth of iTunes, Software and Services," said Tim Cook, Apple’s CEO...."

Many owners of Apple shares apparently disagreed, they were trading down more than 6% an hour after this morning's opening (and on a $500+ stock, that's a big number).

Based on yesterday's closing price of $550.50, the $3.05 dividend represents an annual yield of 2.20%.

The Bigger Picture:

Will Profits from Big Macs Add to Your Retirement Income?

In 1948, the McDonald brothers redesigned and remodelled their drive-in restaurant in San Bernardino, California. Taking inspiration from Henry Ford's assembly-line, they created the fast food revolution, with the quick service and low prices we now take for granted.

In that same year, the U.S. National Labor Relations Board ruled unions could include pension issues in contract negotiations. That ignited a massive expansion of pension plans.

In the 1950s, pension funds started buying stocks, rather than just bonds or their equivalents; in addition mutual funds came of age. With these two developments working, middle class people became owners of big business. At first, their stakes were modest, but steadily growing.

And in just a few decades, they gained controlling interests in many large corporations through their funds. Management guru Peter Drucker has called it, "...one of the most startling power shifts in economic history."

Now, working people reap the benefits of those investments, collecting much of the profit distributed by McDonald's and other big corporations.

Discover how the pieces fit together. In Big Macs & Our Pensions: Who Gets McDonald's Profits? - a new booklet -(about 25-pages), you will:

• learn more about the McDonald's transformation and its implications for the future
  
• find out how McDonald's makes its profits (and it involves more than selling Quarter Pounders)
  
• meet some of the working people who get McDonald's profits through their pension and mutual funds
  
• find out how low wages became embedded in the fast food industry
  
• hear accusations from critics of McDonald's wages, and
  
• learn who has the ultimate say on fast food wages (the answer may surprise you).

You may not be among the owners of McDonald's. But if you belong to any pension plan, or contribute to a mutual fund or whole life insurance policy, you likely own pieces of some big corporations.

More importantly, though, your retirement income will be bigger and grow more dependably than you would otherwise expect.

Big Macs & Our Pensions: Who Gets McDonald's Profits? is now available at Amazon.com