Apple Offering Stock Dividends, Share Repurchasing

 
 
By Nicholas Kolakowski  |  Posted 2012-03-19
 
 
 

Apple has finally decided what to do with its $100 billion cash reserve. During a call with financial analysts, company executives detailed a new stock repurchasing and dividend program that will reward shareholders.

This plan kicks off July 1, with a quarterly dividend payment scheduled for the company€™s fiscal fourth quarter of 2012. After that, Apple plans to authorize a $10 billion share repurchase program at the beginning of its fiscal 2013 at the end of September. The dividend will total $2.65 per share. Apple executives did not say if the company had other plans, such as acquiring other businesses and their technologies, although Apple has made some small but strategic buys during the last several years.

Wall Street pressure for some sort of remuneration has risen along with Apple€™s stock price. The company sits on an enormous reservoir of cash, thanks in large part to blockbuster sales of mobile devices such as the iPad and iPhone. Yet despite growing cash reserves and investment pressure, Apple has traditionally appeared reluctant to even consider paying out a dividend to stockholders. In February 2010, for example, former CEO Steve Jobs told the audience at the company€™s annual investors meeting that, rather than pay out a dividend or buy back shares, he preferred to €œleave the powder dry€ for possible acquisitions.

€œWho knows what€™s around the next corner,€ he added, according to Reuters. €œWhen we think about big, bold things, we know that if we needed to acquire something, a piece of the puzzle, to make something big and bold a reality, we could write a check for it.€

Current CEO Tim Cook spent a good portion of a March 19 conference call assuring analysts and media that Apple€™s ability to respond to industry shifts would remain unhindered, dividend or no. €œWe will maintain our disciplined approach,€ he said. €œThese decisions will not close any doors for us.€

He cited the chance to broaden Apple€™s investor base, and curb any dilution from company employees tendering their shares, as reasons behind the decision to initiate the dividend and buyback.

Analysts immediately pounced on the announcement. €œWe see this as very positive for the stock as the large market cap is one of the major hindrances to future upside, and this announcement will allow dividend investors to get involved,€ Peter Misek, an analyst with Jefferies & Co., wrote in a co-authored research note March 19. €œWe expect dividend increases in the future.€

Others commented on Apple executives€™ reluctance to discuss possible dividend expansion. €œWhile some investors may have wanted some more visibility into future increases in the dividend,€ Gene Munster, an analyst with Piper Jaffray, wrote in a research note released soon after Apple€™s conference call, €œwe believe the dividend achieves the main goal of expanding [Apple€™s] shareholder base.€

Cook declined to discuss any other matters during the call, including any sales numbers for the new iPad, which went on sale March 16.

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