Apple finally opens purse strings to pay dividend
Source: Agencies |
March 20, 2012, Tuesday
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Print Edition
Print Edition
THIRTY-SIX years after its founding, Apple Inc is finally loosening its purse strings to reward shareholders directly, by instituting a dividend and share buyback program.
Investors had been expecting yesterday'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 US$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. Yesterday, 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 US$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 yesterday said it will pay a quarterly dividend of US$2.65 per share, starting in its fiscal fourth quarter, which begins July 1.
The dividend works out to US$10.60 annually, or 1.8 percent of the current stock price. That annual yield - how much the company pays out in dividends compared with its stock price - is below that of other big technology companies such as 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 US. It will spend more than US$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.
Investors had been expecting yesterday'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 US$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. Yesterday, 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 US$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 yesterday said it will pay a quarterly dividend of US$2.65 per share, starting in its fiscal fourth quarter, which begins July 1.
The dividend works out to US$10.60 annually, or 1.8 percent of the current stock price. That annual yield - how much the company pays out in dividends compared with its stock price - is below that of other big technology companies such as 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 US. It will spend more than US$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.
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