Why Apple Announced Its Stock Dividend & Repurchase Plan


Tim Cook's making his mark on Apple.

Confirming a press release from just ten minutes earlier, Apple CEO Tim Cook has confirmed that Cupertino will use its vast hoard of cash to initiate a quarterly dividend payment to current shareholders, as well as buy back almost $10 billion in stock to help avoid dilution of employee equity.

Cook began the call by stressing that Apple’s fortunes were better than ever. 37 million iPhones were sold last quarter, but there’s plenty of room for opportunity, with worldwide cellphone user set to grow from 1.6 billion in 2011 to over 2 billion by 2015, most of which are expected to be smartphones. Tablet growth is similar: Apple’s sold 55 million iPads before the third-gen iPad was released, and it’s estimated that there will be 320 million tablets by 2016. And the Mac just had its 23rd consecutive quarter of growth.

Apple’s successes have resulted in a cash balance of over $100 billion. Apple says that “after a lot of analysis, thinking and listening to the input we were getting from our shareholders,” they decided to initiate a hybrid program with the following goals:

a) Allow shareholders to generate income from their AAPL stock.

b) Prevent dilution of employee equity by buying back public stock.

c) Make owning AAPL stock more attractive to potential investors.

d) Maintain enough of a warchest to take advantage of future investments.

As such, Apple ultimately decided to pay investors a quarterly dividend of $2.65 a share. Apple estimates this will cost $10 billion per year, and make Apple one of the highest dividend payers in the company. The dividend will be officially declared in July at the Q3 quarterly earnings call, along with payment and record dates.

In addition, starting on September 30th, Apple will begin a stock repurchase plan, which they expect to cost them $10 billion by 2013.

All told, Apple expects to spend $45 billion on the above programs within the next three years. Even so, Cupertino is confident that they still have enough money to be as aggressive as they have historically been investing in new technology.

“Even with these investments, we have a huge warchest, and plenty of cash to run our business,” said Cook.