‘Loosening up its Purse Strings’: Apple Shareholders Poised to Make Gains as Company Announces Buyback Program
- Posted on March 19, 2012 at 11:15am by
Becket Adams
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NEW YORK (AP/The Blaze) – Apple’s top brass had an “internal discussion” over the weekend regarding the company’s enormous $97.6 billion cash balance.
Apple CEO Tim Cook announced the company’s decision this morning: Apple Inc. is finally “loosening up its purse strings” to reward shareholders directly, by instituting a dividend and share buyback program (meaning Apple will buy back its own shares at a price greater than the current market value).
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, 2012.
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.
Apple Inc. stock quote (as of 11:35 EST)
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. To put that in perspective, and as mentioned earlier on The Blaze, that means Apple Inc. is currently worth more than Greece.
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.
The Associated Press contributed to this report.
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RedDawn2012
Posted on March 20, 2012 at 8:18am“Think Different”? Myself thinks lesser of Apple after seeing this painful grammar.
Report Post »Formula382
Posted on March 19, 2012 at 9:47pmApple…slave labor is an understatement, sweat shop, child labor law violator, et. al.
http://www.youtube.com/watch?v=9jOgRpO5i94&feature=related
Report Post »sunnydecoy
Posted on March 19, 2012 at 8:05pmAnd the down hill slide begins. When companies start to care more about shareholders then anything else innovation is no longer the most important thing. Product slips shares lose value and the company becomes nothing special.
Report Post »seeker9
Posted on March 19, 2012 at 8:26pmWhy is that? Shareholders invest in the company because of innovation which feeds company growth; more jobs, more earnings, and hopefully more innovation. I don’t get why you consider a dividend is throwing everything down the toilet. Anyone can be a shareholder if they like. High commissions to a broker are a thing of the past. There is always a risk and shareholders deserve to be rewarded for taking the risk.
Report Post »RestoreCapitalism
Posted on March 19, 2012 at 2:39pmMy question is how much are they going to spend to try to get Obama re-elected? I hope the truth wins out over his unlimited campaign money.
Report Post »barber2
Posted on March 19, 2012 at 2:32pmOuch. These capitalists are being way too successful. Not to worry. Am sure some Obama czar or regulator will haul them in for some “redistribution” talk !
Report Post »PopModal
Posted on March 19, 2012 at 3:47pmDividends are a form of wealth redistribution. The Marxists should be proud.
Report Post »seeker9
Posted on March 19, 2012 at 4:34pm@POP
Report Post »That is a claim I never heard before. Shareholders put their money at risk, money they already paid taxes on, and as such are part owners of the company. They therefor share in the profits in the form of dividends or goeth in the company. In my mind, redidtribution is taking from people who earn money and give it to people that do not work/invest/contribute. Sounds like you believe any profit is redistribution.
ohiowordguy
Posted on March 19, 2012 at 12:59pmApple should buy GM. I’m serious!
GM’s current market cap is $40BN. That would take less than half of Apple’s cash-on-hand.
The purchase would effectively pay back the US govt., and if it wanted to, Apple could then take GM private. After retooling it in Steve Jobs’ vision, Apple could then write the book for 21st-century US-based manufacturing.
Note that I said US-based.
I do not mean they should ourtsource; yes I know that Apple manufactures overseas.
What I mean is, if anyone can turn around US manufacturing, it is Apple. If they could find a way to scrap those job-killing union contracts, and rework management, engineering and product development in the Steve Jobs model…Apple could literally save the USA’s manufacturing sector.
Fifteen years ago, pundits were writing Apple’s epitaph. Today, it is the largest company in the world. Clearly, they are doing something right!
Report Post »vox_populi
Posted on March 19, 2012 at 1:44pmWhat incentive could they possibly have for keeping the manufacturing jobs in the United States? Why pay people decent wages in safe working conditions here when you can employ an army of (functionally) slaves in the Foxconn plants of China?
We’re not going to get jobs back in the States just by gutting safety regulations and reasonable pay. Not unless you want to live like animals in some factory-city.
Report Post »barber2
Posted on March 19, 2012 at 2:39pmVOX: sure. Guess that is also why we have the highest corporate tax rates in the world . That surely doesn’t have anything to do with this relocation over seas issue ???? Ah, the depth Lefty logic , their convoluted rhetoric , and their stupid economic policies of “soaking ”/ punishing those nasty rich corporations ! Duh…
Report Post »vox_populi
Posted on March 19, 2012 at 3:01pm“Guess that is also why we have the highest corporate tax rates in the world . That surely doesn’t have anything to do with this relocation over seas issue ????”
No, it doesn’t. Our corporate tax rate is high, but contains thousands of loopholes that mean most major companies can use their lawyers to get out of paying much. The corporate tax rate is primarily an issue for smaller businesses that can’t afford to leave the US anyway. At any rate, I stand by what I said because THAT’S WHAT APPLE SAID TOO when asked about the issue.
http://www.nytimes.com/2012/01/22/business/apple-america-and-a-squeezed-middle-class.html?pagewanted=all
Report Post »masimo
Posted on March 19, 2012 at 12:29pmHow about Apple actually make their product here in the USA instead of slave labor in China.
Report Post »vox_populi
Posted on March 19, 2012 at 1:50pmBasically, besides the cost-cutting measures of not having to deal with paying fair wages, safe working conditions, etc., the reason Apple (and other tech companies) don‘t make stuff here is because we’ve made such poor investment in our human capital (ie, average workers). The healthcare system here is nightmarish (and no, not just because of “Obamacare,” which changed very little) and its our businesses that take the burden by being forced to provide health insurance because the government doesn’t, and our educational system is also appallingly bad thanks to declining state funding and the never-ending growth of bureaucratic administrators.
Report Post »Darmok and Jalad at Tanagra
Posted on March 19, 2012 at 11:28amApple is just trying to jump the gun, buy back all their stock, and then announce they will allow the US to nationalize them. There is a topic, talk amongst yourselves.
Report Post »SpankDaMonkey
Posted on March 19, 2012 at 11:40am.
Report Post »I think Obama can do that already……….
seeker9
Posted on March 19, 2012 at 12:03pmThey would nationalize the oil companies first. The green agenda is high priority.
Report Post »barber2
Posted on March 19, 2012 at 2:34pmThis Friday‘s night’s next Executive Order: National Defense Against Capitalism Preparedness Act ?????
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