Dividend Policy

Recently Apple Corporation has been heavily criticised for its dividend policy and lack of pay-outs despite having huge amounts of Cash at their disposal.
There are a few reasons why they may not have paid out any extra;
Firstly, there could be legal constraints such as the need to protect creditors. Considering the amount of cash that Apple has on hand however, suggests that they have more than enough to cover any loan covenants that may exist on loans.
Secondly, this also covers any liquidity constraints that they may have. Apple does not have a significantly high level of debt and does not face any earnings problems that could impact on interest payments.
In a recent press release from Apple, the changes to their dividend policy were announced: "the Board has approved a 15% increase in the Company’s quarterly dividend and today has declared a dividend of $3.05 per common share, payable on May 16, 2013 to shareholders of record as of the close of business on May 13, 2013. Apple is among the largest dividend payers in the world, with annual payments of about $11 billion."
To me this suggests that Apple is actually making very large payments every year and in relation to Porter's (1955) theory regarding the acceptability of dividend policies, should be considered as very generous.
Porter argued that a dividend policy would only maximise shareholders wealth if the new share price plus the dividend were more than the previous share price.
Apple may be holding on to the cash so that they have the necessary capital to invest in any +NPV (Net Present Value) projects which would increase shareholder wealth in the longer term. Should Apple really be criticised for actually paying out decent dividends while holding on to Cash that may be used in the future for further investment and expansion.
The reason this strategy has been criticised is because they have been hoarding cash for a few years now, with no significant investment introduced and currently no plans to do so.
This may be why, along with the increase to dividends, Apple intends to spend $60bn on a share buyback scheme; the "largest single share repurchase authorisation in history".
Modigliani and Millar (1961) would support the view taken by investors requesting a pay-out; they argue that dividends should be a residual payment: any funds left over after all +NPV opportunities have been invested in should be paid out as a dividend.
It is actually in the Shareholders interest for Apple to reinvest the Cash as this would add more shareholder wealth than an increased dividend would.
Apple's share price has been falling as it faces stronger and stronger competition from Android and increasingly Samsung. When the increase to dividends was announced the share price rose 5.5%, which is a point in favour of simply paying out dividends in order to keep investors happy and not damage their market value any further. This action is representative of dividend relevance as a company that pays more dividends is likely to be valued higher than one with lower pay-outs.
Apple's criticism for not returning Capital also stems from not giving a reason for their actions. If they were to say they had it earmarked for a particular investment then it may have reduced the growing public feeling of Apples selfishness.