Apple to pay dividend, start stock buybacks

March 19, 2012 7:01:55 AM PDT
Apple Inc. is finally using its $98 billion cash hoard to reward shareholders, saying it's instituting both a dividend and share buyback program.

Investors' expectation that Apple would soon declare a dividend has already bolstered the stock of the world's most valuable company, driving its market capitalization to about $546 billion.

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.

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.

A $10 billion share buyback program will begin next fiscal year, which starts Sept. 30, and run for three years.

Apple is sitting on $97.6 billion in cash and securities. For years, it has resisted calls to reward shareholders with some of that money. Since the death of CEO Steve Jobs, management has signaled that it's been considering options for the money.

Apple has been using cash for its business, for instance by investing in long-term supply contracts for crucial components. Cook said the dividend and buyback won't prevent it from important investments in the future.

"These decisions will not close any doors for us," he told analysts and reporters on a conference call Monday morning.

The dividend will cost Apple about $10 billion annually. That's less than the cash the company generates, so its cash levels will continue to grow, but at a slower rate.

Apple generated $31 billion in cash in the fiscal year that ended in September.

Apple shares have risen 37 percent since Oppenheimer said on Jan. 24 that Apple's board was in "active" discussions about the use of cash. In premarket trading, the shares rose $10.08, or 1.7 percent, from Friday's close to $595.65. Just before the announcement, the shares were above $600.

The dividend opens up ownership of Apple shares to a wider range of funds. Many "value-oriented" funds are not allowed to buy stocks that don't pay dividends.

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.

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.

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