Say Hello to 'iDividend'

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

Written by Jason D. O'Grady, Contributing Editor on March 18, 2012

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