Putting to rest all speculation on what it will do with its enormous war chest, Apple, Inc. (AAPL: Quote) finally announced plans Monday to again start paying quarterly dividends, and also set a $10 billion share repurchase program.
Investors had been clamoring for the world's most valuable company to return some cash to shareholders.
Apple said it plans to pay a quarterly dividend of $2.65 per share from the fourth quarter of fiscal 2012. The Silicon Valley giant paid its last dividend in December 1995.
The company also noted that the three-year $10 billion share repurchase program is set to kick off later in the year from fiscal 2013.
Apple revealed that it expects to spend $45 billion over the next three years through dividend payments and share buy-backs.
The share repurchase is expected to neutralize the impact of dilution from future employee equity grants and employee stock purchase programs.
Cupertino, California-based Apple is currently sitting on a cash pile approaching about $100 billion.
On a conference call following the announcement, CEO Tim Cook said he was also considering splitting the company's shares, but there was 'very little support' for the idea that a split would help the stock. However, he added that a split could be possible going ahead if the board thought it was in the best interest of Apple and the shareholders.
Cook began by saying that Apple had seen a "record weekend" and that the company was "thrilled" with the result. He was talking about the sales of the new ipad, but did not reveal any numbers. He added that Apple's pipeline is "full of stuff" and that customers will be "incredibly pleased" with what they see coming out.
On the dividend, Cook primarily said he wants to broaden investor base by attracting new investors, and Oppenheimer reasoned it out saying some funds do not invest in companies that do not pay dividends. Cook added that the dividend and buyback will be reviewed periodically.
The company had revealed earlier that it will not discuss any other topic other than cash balance at the call. There were also rumors that the company could possibly announce a share buyback, but the dividend announcement was the most likely. The investors have got both now.
The calls for renewing the dividend payments, which has become more acute as the company amasses a cash horde, is less about what to do with its mounting reserves and more to do with what kind of company Apple sees itself in the post-Steve Jobs era.
The shares of the company are currently trading above $600 in pre-market trade, a mark it just kissed four days ago and retreated later. It hit the $600 mark just about a month after the iPad maker crossed the $500 mark and a day before it started selling the new iPad.
Apple's key product launches with a continued stronghold on the smartphone and tablet market, and the possibility of a dividend payment linked to the cash horde it possess are some of the primary reasons why Apple stock is continuing to rise.
The rise in Apple's stock price in the last decade has silenced any calls for a dividend during the amazing run of its iPod, iPhone and iPad products. Since the last dividend in 1995, at roughly five year intervals, the company has twice split its stock, resulting each time in a doubled share volume.
The stunning evolution of Apple can be almost fully credited to its co-founder and former CEO Steve Jobs, who died in October 2011. Jobs became the backbone of Apple since he returned to the company some fifteen years ago.
Apple was really non-existent at that time, but Jobs transformed it from a struggling PC maker maker to a global behemoth manufacturing portable music players, multimedia phones, and tablet computers.
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by RTT Staff Writer
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