Apple to pay dividend, start stock buybacks

Mar 19, 2012 By PETER SVENSSON , AP Technology Writer
In this Oct. 4, 2011 file photo, Apple CEO Tim Cook gestures during the introduction of the iPhone 4S, at Apple headquarters in Cupertino, Calif. Apple Inc. said it will announce the outcome of its internal discussion concerning its enormous cash balance on Monday morning March 19, 2012. (AP Photo/Paul Sakuma, File)

Thirty-six years after its founding, Apple Inc. is finally loosening up its purse strings to reward shareholders directly, by instituting a dividend and share buyback program.

Investors had been expecting Monday's announcement, driving up Apple shares 37 percent since management hinted in January that a dividend was in the works.

Apple, the world's most valuable company, sits on $97.6 billion in cash and securities. For years, CEO Steve Jobs resisted calls to reward shareholders with some of that money. He used to say that the money was better used to give Apple maneuvering room, for instance by giving it the ability to buy other companies.

Jobs died in October after a long fight with cancer. On Monday, new CEO Tim Cook said that with this much cash on hand, a dividend wouldn't restrain the company's options.

"These decisions will not close any doors for us," he told analysts and reporters on a conference call.

Apple generated $31 billion in cash in the fiscal year that ended in September, and is on pace to generate even more in the current year. That means its cash pile will continue to grow even with a dividend and a buyback program, albeit at a lower rate.

Had it kept amassing cash and low-yielding securities, Apple could eventually have opened itself to legal challenge from shareholders, who could have argued that it was misusing their money.

Apple said Monday that it will pay a quarterly dividend of $2.65 per share, starting in its fiscal fourth quarter, which begins July 1.

The dividend works out to $10.60 annually, or 1.8 percent of the current stock price. That annual yield - how much the company pays out in dividends compared to its stock price - is below that of other big technology companies like Microsoft Corp., currently at 2.5 percent, and Hewlett-Packard Co., at 2 percent.

However, in absolute terms, Apple will pay one of the richest dividends in the U.S. It will spend more than $10 billion on dividends in its first year, placing it just below companies including AT&T Inc. and Verizon Communications Inc., for whom the dividend is the main way of attracting investors.

Exxon Mobil Corp., the world's second largest company by market cap, pays about $9 billion in dividends annually.

The dividend opens up ownership of Apple shares to a wider range of funds, potentially boosting the stock price in the long term. Many "value-oriented" funds are not allowed to buy stocks that don't pay dividends

Apple said the $10 billion share buyback program will begin next fiscal year, which starts Sept. 30, and run for three years.

Buybacks are a popular alternative to dividends, since they reduce the number of shares outstanding. That means every remaining investor has title to a larger share of the company.

Cook said the main point of Apple's buyback is to offset the shares issued to reward the Cupertino, Calif., company's employees.

In morning trading, Apple shares rose $7.75, or 1.3 percent, to $593.32. Last week, the shares hit an all-time record of $600.01. The company is worth $555 billion.

The dividend and buyback announcement comes three days after the launch of Apple's latest iPad tablet in the U.S. and nine other countries.

Explore further: Chinese man brings gay conversion therapy lawsuit

1.6 /5 (7 votes)
add to favorites email to friend print save as pdf

Related Stories

Apple juggernaut gets little investor respect

Jan 25, 2012

(AP) -- Apple is worth $415 billion, putting it neck and neck with Exxon Mobil as the world's most valuable company. But by standard Wall Street measures, its stock is a bargain.

Cisco to start paying a dividend by next summer

Sep 14, 2010

(AP) -- Cisco Systems Inc., the world's largest maker of computer-networking gear, said Tuesday that it would pay its first dividend by July, the end of its current fiscal year.

Apple CEO hints company will part with some cash

Feb 23, 2012

(AP) -- Apple CEO Tim Cook believes the world's most valuable company has more money than it needs. His next challenge is to figure out whether Apple should break from the cash-hoarding ways of his predecessor, the late ...

Qualcomm ups dividend, approves up to $4B buyback

Mar 06, 2012

(AP) -- Mobile phone chip-maker Qualcomm Inc. said Tuesday that its board approved the increase of its quarterly dividend by 16 percent to 25 cents and up to $4 billion in stock buybacks.

Recommended for you

Chinese man brings gay conversion therapy lawsuit

3 hours ago

(AP)—A gay Chinese man said Thursday he was suing a psychological clinic for carrying out electric shocks intended to turn him straight, as well as the search engine giant Baidu for advertising the center.

Alcatel loss narrows in 2Q but revenue stagnates

4 hours ago

(AP)—Telecommunications equipment company Alcatel-Lucent SA says its net loss narrowed in the second quarter thanks to lower accounting charges, while revenue stagnated and restructuring charges mounted.

Sony surprises with first quarter profit

8 hours ago

(AP)—Sony Corp. reported a surprise eightfold jump in quarterly profit Thursday as sales got a perk from a cheap yen and its bottom line was helped by gains from selling buildings and its stake in a video-game maker.

User comments : 1

Adjust slider to filter visible comments by rank

Display comments: newest first

Vendicar_Decarian
Mar 19, 2012
This comment has been removed by a moderator.
Yelmurc
1 / 5 (2) Mar 19, 2012
These dividends and stock buy backs won't actually keep Apples Cash pile from building up. It will just slow the growth.