Dividend investors keeping looking for free cash flow to figure out whether a company can pay dividends. Apple Inc, a technology or consumer company has loads of cash on its books. However, it does not pay dividends. What is more interesting is with USD 25+ billion cash and billions in cash flow every year; it does not show any inclination for sharing it with common shareholders. Not even a token amount. So why is that Apple is does not pay dividends? At this point, I am not even asking about growing dividends.

Apple has been in existence since the technology revolution began in late 70s and early 80s. Apple products had been termed as elitist with its high cost computer hardware and operating system. It remained closed to outside world and Apple did not team up with other companies. Since 2000 this aspect has changed. Apple now allows independent developers to use its platform for further application development. Opening up has allowed Apple to grow.

One of the hallmarks of all Apple products has been the ease of use and simplicity of its user interface. Each and every product that it has introduced has this unique characteristic. There have been umpteen reports analyzing Apple products and almost every report shows that technologically the hardware systems does not seem to be unique one. When I say not unique, I mean the technology existed; Apple did not have had to go bottoms up innovation to come up these products. Many have cited me to the iPhone’s touch screen saying it is revolutionary. Well, again Apple did not invent it, touch screen existed. Apple applied that hardware technology in an innovative way.

In last ten years, Apple entered the existing music player market (iPod) and existing phone market (iPhone). In both cases, it entered with a product that completely changed how consumers view and use these products. It did not enter the market with a so called replicates or to be one of them. It focused on being unique and it focused its energy on how to change the market. It focused on innovation using industrial product design.

Apple not only gave the hardware, it provided a supporting environment like iTunes. It was an innovation of business model.

In all these great products and business models, there is one problem. Once these products are out, the question is what is next? Once these products mature, market saturates, and competition catches up, where will the next growth come from? There is a lack of visibility about future sustainability. There is a lack of visibility about future direction where the company is going to move. There is a lack of understanding about future cash flow. Can it keep its innovation engine going on forever?

I am one of those millions of aficionados who love Apple products. Unfortunately, I cannot say the same when it comes to investing. Questions like these make me wary of investing in Apple.

At this point in time, Apple is only company that can challenge Microsoft with its operating system. I believe it already has the product, but is Apple willing to go that route? If it does happen, may be I will rethink my views of investing in Apple, until then it remains a puzzle to me.