The growth trajectory of Apple's cash hoard.
Apple has announced that its shareholders of record on August 13, 2012 will be paid a quarterly dividend of $2.65 per share on August 16, beginning the regular distribution of about $2.5 billion of the company's huge cash pile directly to its investors every three months.
Apple has not paid a dividend to its shareholders since the end of 1995, when the company began stumbling through a series of significant quarterly losses. However, after returning to regular profitability under Steve Jobs, the firm has amassed a cash pile that has now grown to $117 billion.
In March, the company's chief executive Tim Cook announced that after studying various options, Apple's board of directors had approved plans to begin paying a quarterly dividend as well as buying back $10 billion of shares.
Both actions directly benefit investors. Stock buybacks convert the company's cash into stock demand, which should help raise the the stock value as well offset new stock distributions the company has granted to its employees as part of its stock-based incentive programs.
Dividends pay cash directly to shareholders, giving them an additional form of income that does not require them to sell any of their shares. By paying a dividend to shareholders, Apple's shares are also expected to become more attractive to broader market of investors.
Three months ago, Cook stated that Apple has "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. You’ll see more of all of these in the future.
“Even with these investments," he added, "we can maintain a war chest for strategic opportunities and have plenty of cash to run our business. So we are going to initiate a dividend and share repurchase program.”
Too much cash to get rid of
Over the next three years, Apple has stated that its buyback and dividend plans will distribute $45 billion of its cash pile. Across the company's 935 million outstanding shares, the quarterly dividend will amount to nearly $2.5 billion in payments to investors each quarter.
A dividend equivalent will also be paid to holders of Apple's restricted shares, although Cook has declined to collect dividend payments for the 1.125 million shares of restricted stock he has been granted, which would otherwise be worth over $75 million.
Apple generated an additional new $7 billion in cash during the June quarter, on top of the $10 billion from the previous quarter that it had added to its existing $100 billion stockpile. This makes its current dividend payments very modest when compared to its current and future cash position. At the same time, Apple's $2.5 billion in quarterly dividend payments will make it one of the highest dividend payers in the U.S.
Analyst Gene Munster of Piper Jaffray noted in March that, "while some investors may have wanted some more visibility into future increases in the dividend, we believe the dividend achieves the main goal of expanding AAPL's share holder base. Given Apple will still be generating significant net cash, we believe the dividend could increase by 20% after the first year."
7-24-12
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