Say Hello to 'iDividend'

Say Hello to 'iDividend'

Summary: For the first time in 17 years, Apple today announced a 2 percent dividend and a $10 billion stock buyback program.

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TOPICS: Banking, Apple
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Say Hello to 'iDividend' - Jason O'Grady

Apple Inc. (NASDAQ: AAPL) has posted its press release about today's cash balance conference call:

Subject to declaration by the Board of Directors, the Company plans to initiate a quarterly dividend of $2.65 per share sometime in the fourth quarter of its fiscal 2012, which begins on July 1, 2012.

Additionally, the Company’s Board of Directors has authorized a $10 billion share repurchase program commencing in the Company’s fiscal 2013, which begins on September 30, 2012. The repurchase program is expected to be executed over three years, with the primary objective of neutralizing the impact of dilution from future employee equity grants and employee stock purchase programs.

(emphasis mine)

This is Apple's first dividend in 17 years.

Apple CEO Tim Cook and CFO Peter Oppenheimer held a historic conference call with analysts and investors today at 6 a.m. PT, 9 a.m. ET.

Tim Cook's comments:

  • Opening 40 new retail stores opening this year
  • Starting a direct enterprise sales force
  • Don't see a ceiling
  • Substantial amounts of cash domestically and abroad
  • Strategic pre-payments of capital
  • Maintain a war chest for strategic opportunities
  • Continue to invest in the business
  • These decisions will not close any doors for us
  • Assess opportunities to invest further
  • Continue to do what's in the best interest of Apple

Peter Oppenheimer discussing the objectives to today's announcement:

  • Maintain flexibility to invest
  • Provide current income for long term shareholders
  • Increase attractiveness
  • Limit dilution from future equity grants and employee stuck purchase programs

Questions:

  • Q. What is Apple's philosophy on dividend growth?
  • A. Oppenheimer: We will review dividend payments quarterly with board, $2.5 billion per quarter making Apple one of the highest dividend payers in the U.S. Don't want to incur tax cost to repatriate cash.
  • Q. How could the shareholder base changes after a dividend is issued?
  • A. Cook: We had 73 percent growth last quarter, speaks for itself, pipeline is full of stuff
  • Q. Apple retains the flexibility to use extra U.S. cash for additional investments, what about $100B in international cash?
  • A. Oppenheimer: Repatriating the cash from offshore would come with a disincentive in terms of a tax liability and Apple has expressed its opinion on this with Congress.
  • Q. When will the dividend be reviewed?
  • A. Cook: Continually.
  • Q.Any thoughts on stock splits?
  • A. Cook: We reviewed it, very little support that it helps the stock
  • Q. What were the iPad sales results on opening weekend?
  • A. Cook: We had a record weekend
  • Q. How do you think about growth in terms of dividend versus buyback?
  • A. Oppenheimer: We're very confident on our pipeline, we're focused on achieving our goals and continuously reviewing the program announced today.
  • Q. What was your methodology for today's program?
  • A. Oppenheimer: $45B for dividends, repurchase and to pay the taxes. Taking a hybrid approach after listening to shareholders, majority of cash returned goes into the dividend (largest in the U.S.), share repurchase is primarily to reduce dilution by future equity grants to employees
  • Q. Thoughts on cash cushion?
  • A. Cook: Tax consequences of foreign cash lead us to focus on domestic cash.
  • Q. On cash balance (on shore), is $30B needed onshore? Could it be lower?
  • A .Cook: there's no magic number, we'll evaluate it "continuously"
  • Q. How widely is the stock held by employees?
  • A. Oppenheimer: 17.7M Restricted Stock Units (RSUs) not invested, also have employee stock purchase program

[Notes above were transcribed live and are not to be considered direct quotes.]

If you missed the call, a replay is now available at apple.com/investorSeeking Alpha has posted a transcript.

AAPL shares were trading at a pre-market high of $608 and the stock is currently up $12.21 (2.09%) as of 12:22 pm ET.

Further reading:

Photo: AppleGazette

Topics: Banking, Apple

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6 comments
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  • Finally

    Well after 17 years they finally give some of they ton of money!
    pepe-el-Toro
    • Having bought stock in Apple...

      in 1996, I've already received a ton of money from them.
      msalzberg
      • Considering the speed of the cashpile growth, it will continue to increase

        ... this year and ever later.

        This is because they will spread their $45 billion program into three years, which still ensures that the cashpile will grow like crazy and will end up with like $200 billion in two-three years.

        So this whole dividend/buyback thing is just to calm the whining voices down, and nothing more.

        We can expect another small program after those three years.
        DDERSSS
    • Know more. Be more.

      Anyone who bought 100 shares of Apple in 1995 for $4,200 now has shares worth over 9 million dollars. Do you really imagine that such people feel that they have received nothing for 17 years?
      Robert Hahn
      • Check your math

        Two splits since then. 100 shares then is 400 now. That's about $240,000.

        Not 9 mill, but not too shabby.
        msalzberg
  • Good timing...

    Even though the iPad & iPhone sales will continue to grow, they will start to lose market share to competitors, which would affect their stock price. A consistent dividend/buyback expectation should keep their stock price buoyant.

    Details here - http://www.tech-thoughts.net/
    sameer_singh17