Apple and Google

two questions I have are:

• Why do they enjoy the luxury of trading at such ridiculous multiples?
• Why don't they pay a dividend?

I mean yeah Apple beats estimates but still has a multiple of like 25.  That is ridiculous.

What is the basis behind this?

And why no dividend.  I mean Apple has current assets of $33.8 million.  They have no real liabilities.  So why not pay some of this cash out to the shareholders?  What is the real benefit in holding this cash for Apple? 

Guess you can get an okay return from the cash to boost profits but still.  Why not pay some out.

Just wondering peoples thoughts.  #1 is my real question though. 

meant $33.8 billion . . . not million in current assets.

VH2,

That 25 PE is on the back of some serious growth..they will have to really keep growing to keep that PE up going forward.

Both of these stocks are overvalued by 50% if you ask me.

WS, well put... Both companies' explosive growth rates justify their high P/Es.

Also, VH2, don't look at these companies not paying a dividend as a bad thing.  Many companies, tech especially, believe they can spend their money better in other ways (acquisitions, invest in new technologies, hire more engineers, etc) to keep their high growth rates.

You could almost look at dividends as a company saying, "Our best growth days are behind us.  We don't know how best to  use all of our cash, and  we will now pay a dividend to our shareholders to keep their interest in our stock."

Think Microsoft as exhibit A.