Apple to Pay Dividend, Plans $10 Billion Buyback

Discussion in 'Apple' started by Michelle Steiner, Mar 19, 2012.

  1. http://online.wsj.com/article/SB10001424052702304724404577291071289857802.ht
    ml?mod=djemalertTECH

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

    Apple Inc. AAPL +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. MSFT -0.74% and Intel Corp., INTC -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., HPQ -0.73% 2%; Cisco Systems Inc., CSCO -0.22% 1.6%;
    International Business Machines Corp., IBM -0.61% 1.5%; and Oracle Corp.,
    ORCL -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

    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.

    -- 
    If you always reach your goals, you set the bar too low.  If you never
    reach your goals, you set the bar too high.

    --
    Tea Party Patriots is to Patriotism as
    People's Democratic Republic is to Democracy.
     
    Michelle Steiner, Mar 19, 2012
    #1
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  2. Michelle Steiner

    JF Mezei Guest

    Michelle Steiner wrote:
    > http://online.wsj.com/article/SB10001424052702304724404577291071289857802.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 ?
     
    JF Mezei, Mar 19, 2012
    #2
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  3. Michelle Steiner

    JF Mezei Guest

    JF Mezei, Mar 19, 2012
    #3
  4. Michelle Steiner

    JF Mezei Guest

    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.
     
    JF Mezei, Mar 19, 2012
    #4
  5. Michelle Steiner

    JF Mezei Guest

    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 ...
     
    JF Mezei, Mar 19, 2012
    #5
  6. In article <4f678593$0$4786$c3e8da3$>, JF Mezei
    <> wrote:
    > Michelle Steiner wrote:
    > >
    > > http://online.wsj.com/article/SB10001424052702304724404577291071289857802.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 :eek:)
     
    Helpful Harry, Mar 19, 2012
    #6
  7. Michelle Steiner

    JF Mezei Guest

    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 :)
     
    JF Mezei, Mar 19, 2012
    #7
  8. Michelle Steiner

    Alan Browne Guest

    On 2012-03-19 10:26 , Michelle Steiner wrote:
    >
    > http://online.wsj.com/article/SB10001424052702304724404577291071289857802.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.
     
    Alan Browne, Mar 19, 2012
    #8
  9. Michelle Steiner

    JF Mezei Guest

    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.
     
    JF Mezei, Mar 19, 2012
    #9
  10. Michelle Steiner

    Alan Browne Guest

    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.
     
    Alan Browne, Mar 19, 2012
    #10
  11. Michelle Steiner

    JF Mezei Guest

    Alan Browne wrote:

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



    But tomorrow, when the price reaches $602, he might decide there is
    benefit in doing a stock split. So dont take his statement as gospel.
    He has to say what he said, he can't say what is in the plans for the
    stock ahead of a formal announcement.

    A 2-for-1 stock split would bring the price down to $300, and each
    dollar gained in AAPL would then represent twice the return on investment.

    Not sure what sort of impact a stock split has on employees with share
    options though.
     
    JF Mezei, Mar 19, 2012
    #11
  12. In article <4f67a930$0$20231$c3e8da3$>,
    JF Mezei <> wrote:

    > Not sure what sort of impact a stock split has on employees with share
    > options though.


    No effect; their options double too.

    --
    Tea Party Patriots is to Patriotism as
    People's Democratic Republic is to Democracy.
     
    Michelle Steiner, Mar 19, 2012
    #12
  13. Michelle Steiner

    Alan Browne Guest

    On 2012-03-19 17:46 , JF Mezei wrote:
    > Alan Browne wrote:
    >
    >> Cook said today that there is no benefit in splitting the stock or they
    >> would have done it.

    >
    >
    > But tomorrow, when the price reaches $602, he might decide there is
    > benefit in doing a stock split. So dont take his statement as gospel.
    > He has to say what he said, he can't say what is in the plans for the
    > stock ahead of a formal announcement.


    When a CEO/CFO makes such a public statement in the same forum as the
    dividend/buyback, it is not a flippant, casual thing. This will stick
    for quite a while.

    > A 2-for-1 stock split would bring the price down to $300, and each


    Your grasp of first grade arithmetic serves you well. Use it to do good.

    > dollar gained in AAPL would then represent twice the return on investment.


    Except that the rate of growth ($/share per year) would about halve.

    There would be an initial inrush from smaller investors and price rise
    which the institutional investors would (happily) dissipate into their
    own profits, but then it would settle down.

    >
    > Not sure what sort of impact a stock split has on employees with share
    > options though.


    In terms of notional value, no effect.

    The "number" of shares eligible would reflect the split (double for 2:1)
    and the option price would halve for that split ratio).

    --
    "I was gratified to be able to answer promptly, and I did.
    I said I didn't know."
    -Samuel Clemens.
     
    Alan Browne, Mar 19, 2012
    #13
  14. Michelle Steiner

    JF Mezei Guest

    Alan Browne wrote:

    > When a CEO/CFO makes such a public statement in the same forum as the
    > dividend/buyback, it is not a flippant, casual thing. This will stick
    > for quite a while.



    "We have no plans at the moment" simply means "we can't annouce our
    strategy right away".


    HP has been stating publicly that they had no plans to port HP-UX to
    x86. Yet, Oracle documents filed in court show that HP was in the
    process of porting it to X86 when it made those statements, but was
    lucky to not commit publicly because they later decided to abandon
    that project.

    Also, had they fessed up to wanting to port to x86, it would have made
    it quasi official that HP was abandonning Itanium, something it paid
    Intel very dearly to keep a secret. (court documents show an end of life
    was planned for Ia64, and they paid Intel to postpone it by stretching
    development times).


    So CEOs have to be careful not to commit to anything and be vague on
    anything that cannot be formally announced when they speak.

    His statement of no stock split simply means that this is not something
    which will happen in the immediate future. But 3-6 months down the
    roads, all bets are off.

    Should the Apple stock rise to $750 in short order, there would also be
    lots of pressure to split the stock.
     
    JF Mezei, Mar 19, 2012
    #14
  15. Michelle Steiner

    Alan Browne Guest

    On 2012-03-19 19:00 , JF Mezei wrote:
    > Alan Browne wrote:
    >
    >> When a CEO/CFO makes such a public statement in the same forum as the
    >> dividend/buyback, it is not a flippant, casual thing. This will stick
    >> for quite a while.

    >
    >
    > "We have no plans at the moment" simply means "we can't annouce our
    > strategy right away".


    QUOTE

    ... also said that the company has looked at but decided against
    splitting the company’s shares, which at this point are among a small
    number of stocks trading over the $500 mark.

    Cook said that a split is something they have looked at, but he says
    there is “very little support” for the idea that a split would help the
    stock. He says that if the board thought it was in the best interest of
    Apple and holders to do so, they would go ahead and split the stock.

    /QUOTE.

    Again: CEO/CFO's of public co's cannot make such statements and go back
    on them on a whim. It would take several quarterly cycles or a major
    event to justify such a change of plan following a " best interest of
    Apple and holders " stated opinion.

    As Apple looks very cozy for the next few quarters, don't expect a split
    anytime soon.

    --
    "I was gratified to be able to answer promptly, and I did.
    I said I didn't know."
    -Samuel Clemens.
     
    Alan Browne, Mar 19, 2012
    #15
  16. Michelle Steiner

    Alan Browne Guest

    On 2012-03-19 19:00 , JF Mezei wrote:

    > Should the Apple stock rise to $750 in short order, there would also be
    > lots of pressure to split the stock.


    In today's terms that would be no different than a stock in 1980 at $60
    going to $75. No need to split the stock.

    Go buy some Berkshire-Hathaway in the meantime.

    --
    "I was gratified to be able to answer promptly, and I did.
    I said I didn't know."
    -Samuel Clemens.
     
    Alan Browne, Mar 19, 2012
    #16
  17. Michelle Steiner

    Alan Browne Guest

    On 2012-03-19 16:12 , Helpful Harry wrote:
    > In article<4f678593$0$4786$c3e8da3$>, JF Mezei
    > <> wrote:
    >> Michelle Steiner wrote:
    >>>
    >>> http://online.wsj.com/article/SB10001424052702304724404577291071289857802.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's a 3 year buyback.

    > 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.


    The amount the spaceship and support will cost v. the value of the
    buyback (3 years) and dividends (really will come out of cash flow) is
    nothing.

    > 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.


    As Mezei says, the nestegg is huge enough that Jobs wouldn't have been
    able to resist a payout much longer anyway. With Apple getting a measly
    1% or so on that money the shareholders have a legitimate beef to get
    that money working.

    Given earnings/profit at present I'd bet in 3 years that the nestegg
    won't be very much smaller despite the dividends and buyback. (The more
    you buy back the less dividends go out as well...). The real problem is
    dealing with all that overseas cash (wait for another tax holiday, perhaps).

    --
    "I was gratified to be able to answer promptly, and I did.
    I said I didn't know."
    -Samuel Clemens.
     
    Alan Browne, Mar 19, 2012
    #17
  18. In article <4f678e2b$0$9114$c3e8da3$>, JF Mezei
    <> wrote:

    > Despite growing faster than other PC makers, the Mac only has 6% of the
    > PC market.


    That 6% is still twice as big as it was only a few years ago and Window's
    PCs have a huge headstart ... BUT Apple isn't interested in chasing market
    share for the sake of it anyway. If they were, they could easily reduce
    the price of everything they sell (especially these days with the
    ever-growing cash surplus).



    > 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.


    He would have known that Steve Jobs wouldn't be around too much longer,
    but he would also have known that he had an extremely tough act to follow.
    He's probably getting more comfortable in the role and no longer has Steve
    watching over his shoulder (whether that's a plus or a minus remains to be
    seen).
     
    Helpful Harry, Mar 20, 2012
    #18
  19. In article <4f67ba79$0$919$c3e8da3$>,
    JF Mezei <> wrote:

    > > When a CEO/CFO makes such a public statement in the same forum as the
    > > dividend/buyback, it is not a flippant, casual thing. This will stick
    > > for quite a while.

    >
    >
    > "We have no plans at the moment" simply means "we can't annouce our
    > strategy right away".


    Only to those who have conspiracy theories about Apple. It really means
    what it says; they do not, at this moment, plan to split the stock in the
    foreseeable future.

    > HP has been stating publicly that they had no plans to port HP-UX to
    > x86. Yet, Oracle documents filed in court show that HP was in the
    > process of porting it to X86 when it made those statements, but was
    > lucky to not commit publicly because they later decided to abandon
    > that project.


    Yup; they were looking into the possibility, but didn't have any plans to
    actually do it.

    > His statement of no stock split simply means that this is not something
    > which will happen in the immediate future. But 3-6 months down the
    > roads, all bets are off.


    Foreseeable future, not immediate future.

    --
    Tea Party Patriots is to Patriotism as
    People's Democratic Republic is to Democracy.
     
    Michelle Steiner, Mar 20, 2012
    #19
  20. Michelle Steiner

    JF Mezei Guest

    Michelle Steiner wrote:

    >> process of porting it to X86 when it made those statements, but was
    >> lucky to not commit publicly because they later decided to abandon
    >> that project.

    >
    > Yup; they were looking into the possibility, but didn't have any plans to
    > actually do it.



    No. They had planned on porting their proprietary OS to x86 so they
    could put Itanium out of its misery sooner. (it is costing HP billions
    to keep on life support). So when they said pubblicly that they had no
    plans to port HP-UX, they were lying because there were, at the same
    time, working to port it. HP was dishonest. (which this is why they are
    in court defending themselves against Oracle)




    However, in the case of the Apple stock split, all the statement they
    emitted today said is that "we looked at it and don't see a need to do
    this now".

    But when conditions change, I am sure the board will look at it again.
    Could be some major potential investor or existing shareholders
    demanding it, or Apple may have set some value of AAPL above which they
    will re-evaluate a stock split.


    The good news is that we are arguing aboyt how should Apple share its
    immense financial success with its shareholders. We aren't talking about
    creditors forcing Apple into bankrupcy.
     
    JF Mezei, Mar 20, 2012
    #20
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