Apple splits stock 7-for-1, will lavish an obscene $130 billion on investors

“Talk about burying the lede,” Steve Schaefer reports for Forbes. “Apple announced a 7-for-1 stock split Wednesday, but not until the last sentence of a press release heralding an upsized capital return program to $130 billion and alongside the company’s quarterly earnings report.”

“Shareholders of record as of June 2 will receive six additional shares for each Apple share they own, and the stock will start trading on a split-adjusted on June 9,” Schaefer reports. “Apple last split its stock in 2005, when the company was a different animal all together and two years before the debut of its most successful product, the iPhone. Since then, even as the stock surged to ever-higher highs, the company steadfastly refused to split. It wasn’t just the late Steve Jobs who opposed a split either. At the company’s 2012 annual meeting, when shares were not far from where they stand today, Tim Cook dismissed the idea of a split by saying they ‘do nothing for shareholders,’ Bloomberg reported at the time.”

“The split though is hardly the only thing Apple is doing these days that had been anathema during Jobs second reign at the helm. In fact, the capital return increase to $130 billion — up to $90 billion in buybacks and an 8% dividend hike to $3.29 per share that will cost $11 billion per year — marks what amounts to a significant departure from the Jobs era, when the company hoarded cash and investors were content to let them do so with the expectation that it would be put toward innovative new products and massive products,” Schaefer reports. “The upsized buyback and dividend won’t be coming out of the repatriation of foreign cash though. Apple plans to tap the credit markets once again — at home and abroad — after selling $17 billion worth of bonds last May in its first debt offering in nearly 20 years.”

Read more in the full article here.

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17 Comments

  1. AAPL just blew away earnings estimates and now Cook has blown away Wall Street with stock buybacks, increased dividends and a 7:1 stock split. All this on the strength of “incremental improvement.”

    What happens when a few new products hit the market down the road? I may have to wear shades.

  2. Will the dividend remain the same after the 7-1 split? If I have 1000 shares will it be 7000 shares at 3.29 a share- or will the dividend be reduced by a factor of 7?

  3. How will the 7-1 split effect next years dividend? If I have 1000 shares before the split and 7000 shares after the split, will my dividends be multiplied by 7 or will dividends be proportionally reduced to stay the same?

    1. The May dividend will be $3.29/share/quarter or $13.16/share/year. Once the split happens in June, future dividends will be divided by 7 and become $0.47/share/quarter or $1.88/share/year.

      I initially thought the ~ 7.9% dividend increase was a bit odd given a near 15% increase the last time it was raised; however, the $0.24/share quarterly increase makes a bit more sense now. The new $3.29/share (was $3.05/share) quarterly dividend, when divided by 7, cleanly divides to $0.4700/share. If they added a penny or two more, when divided by 7 (for the expected split), it would have made the quarterly dividend go out to many decimal places. I am sure for ease of administration and communication they did not want to go that direction. Plus, I am sure the $.24/share increase met the company’s goal for dividend growth and cash outflow.

  4. They have a total amount of money that needs to be split amongst shares of stock. But after the split, they will have seven times as many shares of stock. You do the math.

    $/# shares > $/ (# shares x 7)

  5. Well, even though the day after the stock splits I will have 7 times as many shares, my net value will remain unchanged as well as my annual dividend. I get that. However, in spite of what others have said, the split will benefit all of us that continue to hold Apple for the long haul. I have owned them since 1988 and splits and stock value increases have been eye popping compared to all of the other investments that my so called financial advisor recommended. Most of them, especially mutual funds, are worth less than what I paid for them in my IRA 10 years ago. Thanks Apple.

  6. If as has been bandied about Apple is added to the DOW that would likely be good for the stock price. Lots of funds match the DOW so more funds would buy AAPL. Also, I suspect this would make it more difficult for the stock to be manipulated.

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