Nader Rails Against Tech Management; Demands Dividend Payments

In an interview Tuesday afternoon, former U.S. presidential hopeful Ralph Nader attacked the tech companies for not returning cash holdings to shareholders. Nader pointed the finger at Cisco CSCO, which he said is "sitting on $45 billion of the shareholders' money, and they have a very paltry dividend of 6 cents per quarter that's just been recently declared, and they're considering what to do with the money," he told CNBC's Fast Money program. Ralph Nader owns 18,000 shares of CSCO and he has spoken to a "high official" about the company's $45 billion in cash reserves. On the issue of dividends, Nader spoke in terms of revolution, as he prompted American investors to "organize," although it remains unclear what he means. "No one in American history has ever managed to find a way to organize millions of American investor shareholders. We're going to try." Nader believes that a drop in shareholder valuation from "a high of $82 in March 2000 down to about $19 now" should prompt the company to offer dividends which he believes would help stimulate the American economy. Nader also mused over the possibility of stockholders holding 10 million shares pooling a penny per share to hire a watchdog advocate for all Cisco investors. This watchdog, he says, would "press the company bosses every workday." Nader also pointed the finger at Google GOOG, EMC EMC, Microsoft MSFT, and AAPL AAPL, which do not offer dividends and are sitting on enormous cash reserves. Apple's cash pile has become the stuff of legend. Last summer, Apple's cash on hand exceeded the Treasury's, and the quickly-growing figure is currently at $97.7 billion. That's enough cash to pay off the debts of Slovakia, Luxembourg, Bulgaria, Lithuania, Latvia, Cyprus, Estonia, and Malta combined. The company's massive margins (it earned $13.06 billion in profit on $46.33 billion in revenue last quarter) means that that pile will only get bigger. If it released all of its cash reserves to share holders in the forms of dividends tomorrow, that would be a one-time payout of almost $105. That is, however, if the company didn't have to worry about taxes, and that is a serious concern, since much of Apple's cash is overseas, and will face heavy taxes if repatriated. Plus, the company will surely want to keep some money for future research, development and expansion. Nader owns no Apple stock. However, he believes that one communal move by investors could set a precedent "for all these other giant corporations, who in their totality are sitting on $2 trillion of idle cash" while the economy stays stagnant. The juxtaposition of cash-rich corporations and struggling investors may strike a chord with Occupy Wall Street protesters, who pointed out the wealth disparity between the 1% and 99% in rancorous protests last autumn. While Nader expressed support for the movement, his new position on dividend payouts juxtaposes a very different power dynamic between powerless shareholders, who are by definition partial owners of corporations, and corporate management themselves. Instead of being an issue of wealth distribution, the dividend issue is an issue of wealth management, and Nader seems concerned not so much that the companies have too much money, but that they aren't allowing stockholders to cash out on that money quickly enough. "This is the shareholders money," Nader said on Fast Money. The tech industry has been slow to release dividends, with many companies offering no dividend whatsoever. There are few exceptions, such as Seagate STX, whose dividend yield is over 4% after a recent increase of payouts. Intel INTC also offers a dividend yield of over 3%. While technically tech stocks, telecom giants follow their own tradition when it comes to dividends. Both AT&T T and Verizon VZ offer dividend yields well over 5%, so Nader may want to consider moving more into the phone companies than the router companies, if he isn't getting the dividends he wants. A more techie option would be CA, Inc. CA, which has had a healthy profit margin for a while and last year increased dividends that currently yield 3.83%. One of the reasons why tech companies have been so slow to offer dividends may be historical. While the sector has experienced breathtaking growth in the past thirty years, it is still a relatively young sector when compared to the dividend-yielding stalwarts, such as landline phone companies, tobacco producers, and industrial manufacturers. Dividends are a sign of established stability, but they can also be seen as a sign of stagnation. While AT&T has given a steady stream of income to shareholders, its stock is trading at levels seen in 1997, whereas Apple meteoric rise in recent years eclipses passive income from AT&T by orders of magnitude. It should also be noted that Apple did flirt with dividends during the John Sculley years, and everyone knows how disastrous that was. The experience may leave a bitter taste in the mouths of anyone who had Apple stock in the early 90's, to say nothing of Apple management itself. Dividends are ultimately a matter of corporate philosophy that boils down to one question: who knows how to spend money better, the company or the shareholder? Apple has made one decision, and the telecom giants have made another. Ralph Nader's crusade to change management philosophy may appeal to investors looking for a quick payout, but it also may wind up as productive as his 2000 presidential campaign.