Apple To Pay Dividends, Buy Back Shares
Apple announced yesterday it will pay quarterly dividends at $2.65 per share — 17 years after it last paid stockholder dividends at $0.12 per share. Shareholders will see the checks after the fourth quarter of Apple’s fiscal 2012, which begins the first of July this year.
Apple Buyback and Resurgence
Apple’s Board of Directors also approved the buyback of stocks worth $10 billion starting September 30, 2012.
The repurchase program is expected to be executed over three years, with the primary objective of neutralizing the impact of dilution from future employee equity grants and employee stock purchase programs.
Apple CEO Tim Cook explained the move after the long absence in profit-sharing.
We have used some of our cash to make great investments in our business through increased research and development, acquisitions, new retail store openings, strategic prepayments and capital expenditures in our supply chain, and building out our infrastructure. You’ll see more of all of these in the future. Even with these investments, we can maintain a war chest for strategic opportunities and have plenty of cash to run our business. So we are going to initiate a dividend and share repurchase program.
CFO Peter Oppenheimer sees a large chunk of money going to expansion and new opportunities.
Combining dividends, share repurchases, and cash used to net-share-settle vesting RSUs, we anticipate utilizing approximately $45 billion of domestic cash in the first three years of our programs. We are extremely confident in our future and see tremendous opportunities ahead.
The new iPad with its ground-breaking Retina display sold 3 million units in 3 days, and is expected to rake in more profits for the company in the coming months as it rolls out to more countries world-wide.
The overheating issue may put a dent on sales, but Apple diehards and fans are known to ignore minor issues just to have their hands on the latest Cupertino gadget.
While Steve Jobs may not have approved this move by the management, Apple has lost some investors in the past. Said investors reportedly wanted back in only after Apple promised dividend payments.
Of the $3.6 billion that investors added to stock funds this February, three-quarters went to funds specializing in dividend-paying companies.
Apple paid dividends from June 15, 1987 to December 15, 1995, beginning with $0.06 per share and ending at $0.12 for the last quarter of Apple’s profit-sharing years. The stock split twice since that time, and is currently pegged at $601.10.
The Apple Effect
The U.S. stock market got a boost after Apple announced the dividends payout and share buy-backs last Monday. The S&P 500 and the Dow Jones Industrial Average (DJIA) were lifted by Apple’s news.
Bernard Kavanagh, vice president of portfolio management for brokerage firm Stifel Nicolaus explained why the markets reacted this way.
This is the kind of news that will buoy confidence, especially if it’s coupled with signs of life in important areas like employment.
Apple’s decision is going to put a regular check in the mail for its shareholders, and the buyback scheme is going to line the pockets of people who hold the stock.
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