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Apple to Pay Dividend, Plans $10 Billion Buyback

 
 
Michelle Steiner
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      03-19-2012, 02:26 PM

http://online.wsj.com/article/SB1000...71289857802.ht
ml?mod=djemalertTECH

Apple to Pay Dividend, Plans $10 Billion Buyback
By JESSICA E. VASCELLARO

Apple Inc. AAPLÂ*+0.72% said Monday it would pay a dividend to shareholders
and buy back up to $10 billion in stock, heeding calls for the technology
heavyweight to deploy its massive cash pile.

The Cupertino, Calif., company expects to initiate a quarterly dividend of
$2.65 a share in its fiscal fourth quarter, which begins July 1.

On a conference call Monday, Apple Chief Executive Tim Cook said that
"these decisions will not close any doors for us," and that product
innovation remained the company's priority.

The move to pay a dividend amounts to a significant shift for a company
that had regularly argued it needed its cash to secure component supplies
for its gadgets. It also opens the company up to a new class of investor
that only focuses on dividend-paying stocks.

The dividend payout—about $10.60 annually—will cost the company some $9.88
billion a year and carries a yield of 1.81%, landing it short of fellow
cash kings like Microsoft Corp. MSFTÂ*-0.74% and Intel Corp., INTCÂ*-0.54%
whose respective dividend yields currently stand at 2.45% and 3.03%.
However, the yield is in-line or above other tech companies, like
Hewlett-Packard Co., HPQÂ*-0.73% 2%; Cisco Systems Inc., CSCOÂ*-0.22% 1.6%;
International Business Machines Corp., IBMÂ*-0.61% 1.5%; and Oracle Corp.,
ORCLÂ*-0.61% 0.8%.

Technology companies are among the most cash flush in the corporate world,
as they typically don't tie up as much money in plants, real estate,
equipment and inventory as do manufacturers and retailers.

Additionally, Apple's board authorized a $10 billion share repurchase
beginning Sept. 30, the start of its fiscal 2013 year. The repurchase
program is expected to be executed over three years. In the moves, Apple
will use about $45 billion of its domestic cash over that period.

As of the end of December, Apple's cash, cash equivalents and short-term
and long-term marketable securities totaled roughly $97.6 billion, more
than the market capitalizations of all but 52 publicly traded companies at
the time. That was up from the $59.7 billion in cash that Apple had on its
balance sheet the year before.

As of Jan. 13, the company had 932.4 million shares outstanding.

Apple's stock has risen sharply in recent months, in anticipation of a
change in the company's approach, and as it has posted quarterly revenue
and profit records on brisk iPhone and iPad sales. Apple shares were up
1.5% at $594 in early trading Monday.

"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," said Mr. Cook in a statement.
"Even with these investments, we can maintain a war chest for strategic
opportunities and have plenty of cash to run our business."
Apple in Abundance

Monday's announcement, by Mr. Cook and Chief Financial Officer Peter
Oppenheimer, ends months of speculation.

Since becoming CEO in August, Mr. Cook signaled he would consider more
options for the cash stockpile than his predecessor, Apple co-founder Steve
Jobs, who had been opposed to stock buybacks and dividends, according to
people familiar with the matter.

At Apple's annual shareholder meeting in February, Mr. Cook said the
company had been thinking about its cash "very deeply," and is actively
discussing strategies for managing it with the company's board. "It is a
lot," he added. "It is more than we need to run the company."

When asked about Apple's cash parked overseas, Mr. Oppenheimer said on the
call the company had no current plans to repatriate. "We think that the
current tax laws provide a considerable economic disincentive to U.S.
companies that might otherwise repatriate the substantial amount of foreign
cash that they have," he said.

Apple's dividend joins a large number of cash-rich tech companies that have
yielded to investor demand for dividends over the years, including
Microsoft, Cisco and Oracle. While some have done so as their growth rates
matured and opportunities for investment diminished, investors still expect
Apple to grow quickly but want it to return cash to shareholders, because
it is generating significantly more than it needs.

—Mia Lamar contributed to this article.
Write to Jessica E. Vascellaro at (E-Mail Removed)

Corrections & Amplifications
An earlier version of the summary on this article incorrectly said it was
Apple's first-ever dividend. Apple paid a dividend in 1995.

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JF Mezei
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      03-19-2012, 07:14 PM
Michelle Steiner wrote:
> http://online.wsj.com/article/SB1000...71289857802.ht
> ml?mod=djemalertTECH
>
> Apple to Pay Dividend, Plans $10 Billion Buyback



I'm all for the dividend, but does a buyback really accomplish anything
? With the stock price so high, Apple would be buying a tiny proportion
fo ts stock back and probably not make a dent in dilution.


If they had a long term plan to spend that much money every year to buy
back tock, then it would make sense. But as a once time thing, would
this have any impact all all ?
 
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JF Mezei
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      03-19-2012, 07:31 PM
Apple Conference Call on the above:

http://events.apple.com.edgesuite.ne...ent/index.html
 
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JF Mezei
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      03-19-2012, 07:51 PM
Despite growing faster than other PC makers, the Mac only has 6% of the
PC market.

Tim Cook is getting better at being "cheerful" in presentations.

His first presentation as CEO was for the iphone4s and had low "energy"
in it. I was wondering if this was Cook's style, or if it was due to
Cook knowing that Jobs was close to passing away. It appears to be the
later case.

Couple minutes ago, AAPL was at $596 , huge share volume.


BTW, it is interesting that most of Apple's petty cash is locked up
outside of the USA. Repatriating foreign cash would have costly tax
implications. So today's announcement only touches US based cash.

 
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JF Mezei
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      03-19-2012, 07:53 PM
BTW, the stated reason for the $10b buyback is to prevent dilution from
share options given to employees. Looks like Apple employees are very
well compensated ...
 
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Helpful Harry
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      03-19-2012, 08:12 PM
In article <4f678593$0$4786$c3e8da3$(E-Mail Removed) m>, JF Mezei
<(E-Mail Removed)> wrote:
> Michelle Steiner wrote:
> >
> > http://online.wsj.com/article/SB1000...71289857802.ht
> > ml?mod=djemalertTECH
> >
> > Apple to Pay Dividend, Plans $10 Billion Buyback

>
> I'm all for the dividend, but does a buyback really accomplish anything
> ? With the stock price so high, Apple would be buying a tiny proportion
> fo ts stock back and probably not make a dent in dilution.
>
> If they had a long term plan to spend that much money every year to buy
> back tock, then it would make sense. But as a once time thing, would
> this have any impact all all ?


It might have been better to wait until after they had finished building
their new "spaceship", data centres, etc. in case there were some
expensive unforseen problems.

Of course, the fact that they're doing this at all is a significant change
from Steve Jobs leadership, and it is likely to be the first of many
changes under Tim Cook ... which may or may not turn out to be a huge
disaster for Apple.

Helpful Harry )
 
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JF Mezei
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      03-19-2012, 08:49 PM
Helpful Harry wrote:

> Of course, the fact that they're doing this at all is a significant change
> from Steve Jobs leadership, and it is likely to be the first of many
> changes under Tim Cook ...



Am not sure how "religious" Jobs truly was about dividends. I suspect he
had set a "nest egg" target to ensure Apple could survive a hard time as
well as prevent a hostile takeover. Remember that Jobs had had bad
experiences with people backstabbing him.

With the recent tidalwave of cash, I suspect that nest egg target was
surpassed by a significant amount and they can now safely plan on dividends.

We'll never know if the same would have happened under Steve Jobs. I
wouldn't be surprised if it had.


I guess this rules out Apple declaring itself non-profit and becoming a
Church :-)




 
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Alan Browne
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      03-19-2012, 08:56 PM
On 2012-03-19 10:26 , Michelle Steiner wrote:
>
> http://online.wsj.com/article/SB1000...71289857802.ht
> ml?mod=djemalertTECH
>
> Apple to Pay Dividend, Plans $10 Billion Buyback


Shareholder desire of a dividend from Apple has been the subject of
speculation in the business mags/papers/journals for a few months - most
so since the 4S went to market (up nearly $200 since).

I'm not surprised it's happening, just that it is so soon.

When you consider that each Apple share represents about $106 of cash,
the $2.65/s is a bit paltry ($10.60 / year on $590 is about 1.8%).

The buyback is another way to get cash back to shareholders. But then
you're "out".

--
"I was gratified to be able to answer promptly, and I did.
I said I didn't know."
-Samuel Clemens.
 
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JF Mezei
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      03-19-2012, 09:08 PM
Apple closed above $600 ! Yippie !


AAPL $601.1 15.53 2.65% 31,966,468 NASDAQ-GS


Ir is catching up to Google ... :-) My bet is that Apple won't do the
stock split until it has surpassed Google's share price.

 
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Alan Browne
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      03-19-2012, 09:22 PM
On 2012-03-19 17:08 , JF Mezei wrote:
> Apple closed above $600 ! Yippie !


Long term investors don't care about daily closes.

> AAPL $601.1 15.53 2.65% 31,966,468 NASDAQ-GS
>
>
> Ir is catching up to Google ... :-)


Apple surpassed Google when it was at about $150.

> My bet is that Apple won't do the
> stock split until it has surpassed Google's share price.


Cook said today that there is no benefit in splitting the stock or they
would have done it.


--
"I was gratified to be able to answer promptly, and I did.
I said I didn't know."
-Samuel Clemens.
 
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