“Apple is opening the doors to its bank vault, saying it will distribute $100 billion in cash to its shareholders by the end of 2015,” Peter Svensson reports for The Associated Press. “Apple Inc. on Tuesday said it will expand its share buyback program to $60 billion — the largest buyback authorization in history.”
“It is also raising its dividend by 15 percent from $2.65 to $3.05 per share,” Svensson reports. “The dividend yield will be about 3 percent at current stock prices. The average yield for the top 20 dividend-paying companies in the U.S. is 3.1 percent, according to Standard & Poor’s… ‘The decline in Apple’s stock price over the last couple of quarters has been very frustrating for all of us, but we’ll continue to do what we do best,’ CEO Tim Cook said on a conference call with analysts after the release of the results. But he reinforced that the company’s job is not to boost its stock price. ‘The most important objective for Apple will always be creating innovative products,’ he added.”
Svensson reports, “When a company starts doling out its cash to shareholders, it’s usually a sign that its growth is stalling and it’s finding it hard to identify good ways to invest in its own business. But Apple is still growing fast by the standards of large companies, and its cash pile-up is a reflection of the extraordinary success of the iPhone.”
Read more in the full article here.
Related articles:
Debt-free Apple plans to borrow to finance massive capital-return program – April 23, 2013
Apple beats Street on EPS and revenue; ups quarterly dividend by 15%; ups buybacks to $60 billion – April 23, 2013
If Steve Jobs were alive he’d do another buyback instead of upping dividend – March 18, 2013
My traditional view of investing says it is perfectly fine to devote a large part of profits to dividends. I like the idea of dividends. But I can’t help but think Apple will need that money in the near future.
They will need it in the near future, but they will more than make it back by the end of 2015. Does anyone really think Apple will bankrupt itself for no reason? The promise to pay out $100 B is a real show of confidence to me that they know they’ll have plenty left after dividends are paid to still make aquisitions and other plans.
Huh? The dividend went from $10.60 a year to $12.20. That’s about $10B a year going to $12B. $12B is NOT a “large part of profits”. Apple made over $41B last year.
Wall Street – “Mission Accomplished! We finally got them to hand over that cash. Next round’s on me!”
Apple to Wall Street: we’re throwing you a bone. Don’t make the mistake of thinking you can get away with your shenanigans forever. Three words: remember the pipeline.
Wall Street – “Mission Accomplished! We finally got them to hand over the cash. Next round’s on me! Lets get that stock price back up now boys.”
The line about going into debt (debt engines) to get things done is shear madness – especially when you can boast (for the moment) that you are debt-free.
Why lower your pants and bend over for that kind of liability?
“When a company starts doling out its cash to shareholders, it’s usually a sign that its growth is stalling” not a good message to give the world.
Somebody forgot the value of a dollar.
1. The market wants Apple to give back some of its cash hoard
2. It is much cheaper to use debt for this right now than to repatriate its foreign profits
3. Thats it. The decision is an easy one, and not controversial.
Actually, it’s damned controversial decision. It’s a crap idea.
But fed tax-gouging Apple for bringing MEGA$BILLIONS into the USA is also a crap idea.
Sane balance: Too modern a concept for the inept poliTard bizTards in our US government. A curse on both their ‘parties’.
I’ve been a shareholder for almost 20 years, i’m very disappointed that Tim Cook Caved in to the hedge funds and they’re going to take all the profit and the poor Individual long-term investors are going to get the short end. The buyback and the dividend payout should be based on how long an investor has had the stock I Pray that this is not the end of the company i’ve learn to love Because it did the right thing not the Wall Street thing.
It’s sad. No one can invest in a company for the long run anymore, it’s all about volatility now. It’s a game of manipulating a roller-coaster of buying and selling. It’s not not really a game for the small investor, like in Vegas, it’s a great game if you are the house.
It doesn’t work that way, Tom. There is no ‘loyalty factor’ in calculating dividends. If you have a share of common stock, then you get the same dividend as anyone else with a share. Besides, a dividend is theoretically a neutral action for the investor (ignoring tax impacts). Every dollar paid out should be reflected in the stock price, in this case, the increase in the dividend should boost the share price of AAPL for several reasons. First, increasing the dividend is perceived as a vote of long term confidence by the Apple BoD. Second, Apple’s cash hoard was not fully factored into the price of AAPL, so pulling some of that cash out probably won’t put any downward pressure on the stock price. Third, many people will reinvest their dividends automatically (I do). So the dividend will increase demand for AAPL. Fourth, the increased dividend makes AAPl more attractive to income investors. As an investment, AAPL is paying out twice as much as most banks right now. That will also increase the demand for AAPL. All of this means a higher price for AAPL.
For those who are decrying APple’s use of debt to avoid repatriating profits at this time, please consider that AAPL gained around $24 per share in after hours trading. That is an increase of around $24B in Apple’s market cap, more than covering the $21.3B that Apple plans to borrow. That’s right, Apple just created a huge amount of shareholder value in just one hour.
While AAPL may have been up by $24 at one point in after-hours trading, that did not last long. It looks like they closed down $2 at the end of trading.
I am just extremely happy that Apple thinks it makes sense to borrow billions of dollars to buy their own stock back. I think that’s a great validation of my strategy, i.e., being long AAPL since 2005.
Steve must be turning in his grave. Steve did not care too much about money, but the new management is tied up with stock grants. The result, they will make stupid decisions to make their stock go up.
It is perfectly acceptable for a for profit company to do that but please stop saying your priority is to bring great products to your clients. Your goal is to make profit. Enough said.
You are absolutely right. Steve jobs would not have increased the dividends or start dolling money out like this he would have continued innovating to keep the company growing. I’m a huge apple fan but the company is rudderless without Steve.
Anyone at Apple who agrees with this should be removed from their position.
This is moronic.
They are destroying the company.
Give back all the cash and borrow money!?
Steve would never allow this to happen.
I have no respect for the Board or Tim Cook.
this is the beginning of the end for apple.
mark my words!!!
sad day…
To all of you who think Steve Jobs would’ve done something differently or the company’s started its death spiral — come on, lighten up! Steve was a BILLIONAIRE! Sure, he took $1.00 for his annual salary BECAUSE HE COULD AFFORD TO. He still wanted his stock options, his Gulfstream jet, his over-the-top private yacht. And why shouldn’t he have? He worked hard his whole life to accomplish what he did. It’s a bit of a stretch to say that he didn’t care about money, though. Sure, that may not have been his primary motivation but AAPL is a business. “Deliver the product” as they have these last 15 years and the profits will follow.
I’m with Kingmel and rdiddly — these latest events about the dividend and stock buy-back are a good thing! Phil and Clinicaltestmaster — just do the math over the next three years! And we don’t even know what new categories of excellent products and revenue streams are on their way over the next 3-5 years!
think the market and apple rivals sense a weakness in apple since steve’s passing. and they felt tim may not be the right guy to run this company. think we all knew that deep inside.
yes, he may be good at what he did before he took over at the helm. and i’m sure he is a nice guy too. ives is a great designer. period. but apple needs a leader and an innovator with great vision.
sadly, i doubt anyone at apple is at the moment.
well all good things have to end someday. it was hell of a ride for the past 25 years for me.
but miracles do happen though ;p
“Apple’s new pitch to investors” (http://blogs.reuters.com/felix-salmon/2013/04/23/apples-new-pitch-to-investors/) is an article from financial journalist Felix Salmon worth reading about Apple’s plans to increase its dividend and dramatically increase share buy-backs. Don’t get me wrong – I’ve had issues with Salmon in the past. But in this case, he cites some information that pundits, analysts and the public are missing about Apple stock in the near-term: more than ever, the stock is a compelling buy. Here’s why (per Salmon’s article):
“If you assume fungibility of dividends and share repurchases, then you can express that number as an effective dividend yield: a $30 billion dividend, divided by a $400 billion market cap, works out to a yield of a whopping 7.5%.”
I don’t know about you, but I’ll take 7.5% any day. If you hold the stock for the long term (and you should), that 7.5% will compound at a much higher rate than the increased dividend alone. Over 5, 10, 20 years, this would translate into a fortune.
There’s more. Even with this announcement, the company’s $145 billion cash pile isn’t going to get any smaller: the newly-announced program merely brings its dividend and share-repurchase expenditures up to roughly the level of its current free cash flow. Apple will still have more than enough money to invest as much money as it likes in anything it likes, even its new headquarters.
And consider too, that every article I have read recently assumes that Apple will never come up with another great idea ever again, and that all creativity at the company has ceased. Even Salmon infers that the company has permanently become a conservative, slow-growth company.
I call BS.
While all the pundits and analysts wail and assume this, calling Tim Cook every name in the book, my hunch is that the bow of the arrow is slowly be drawn back in Cupertino. Not today, not tomorrow but in the next year, I suspect that we will see another big announcement from Apple, taking the company into a new product category. When that happens, the company’s growth trajectory could zoom upward again. Couple that with the overlooked announcement of the dividend increase and stock buy-back, and you have a remarkable investment.
People are so clueless. And for you and me, that’s an opportunity. We just have to live through all the noise and BS spewed on Apple by know-nothing know-it-alls.
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