Apple Doubles Quarterly Stock Dividend Investment

| Apple Stock Watch

Along with earnings that hit US$43.6 billion, Apple reported on Tuesday that it is more than doubling its investment in returning capital to investors. The company is adding $55 billion to its shareholder returns, bringing the total up to $100 billion, and includes a 15 percent increase in the quarterly dividend.

Apple expands its capital investment programApple expands its capital investment program

The company said in a statement,

As part of this program, the Board has increased its share repurchase authorization to $60 billion from the $10 billion level announced last year. This is the largest single share repurchase authorization in history and is expected to be executed by the end of calendar 2015.

The 15 percent dividend increase brings the quarterly payout to investors up to $3.05, and the company said it is one of the largest dividend payers in the world with annual payments hitting $11 billion.

Apple said it will take on some debt as part of its expanded capital program, which is significant news in that the company has operated fully debt free for years. The company isn't elaborating on the move yet. Presumably the math showed that it's cheaper to borrow money than to bring back some cash from over-seas accounts.

Apple reported sales at $43.6 billion for its second fiscal quarter of 2013, beating Wall Street's $42.49 billion estimate. The company sold 37.41 million iPhones, 19.5 million iPads, and just short of 4 million Macs during the quarter.

The company's earnings report is still underway, so be sure to check back with The Mac Observer for more news from the event.

Apple is trading after hours at $406.13, up 7.46 (1.87%).

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7 Comments Leave Your Own

geoduck

Apple said it will take on some debt as part of its expanded capital program

That bothers me a lot. I understand what you’re saying, but a company with $147B in the band just shouldn’t be borrowing.

Bosco (Brad Hutchings)

They are definitely betting on a tax holiday/amnesty or some long term sanity to come to the corporate tax rate some time in the next four years. Probably not a bad bet. There could realistically be half a trillion of off-shore money on the table with tech companies, representing $100B of tax revenues if the US government eschew’s its typical greed.

$50B stock buyback is quite the admission that their cash is way ahead of their imagination.  That ought to be good for $75-$100 to the share price. Strangely, it leaves Apple at about where it was with cash on hand when investors started seeing it as a negative.

vpndev

@geoduck: they’re borrowing because a lot of their cash is overseas. Bringing it back would cost a lot in tax, but they can borrow against it almost for free because interest rates are so low. Especially when your security is a big pile of cash !

By doing this, they get to use money here without having to repatriate it. As Bosco mentioned, they are probably hoping for a tax change.

vpndev

Can someone with the background please comment on the relative size of the dividend increase (15%) vs. share repurchase plan (fivefold increase).

vpndev

p.s. to Jeff: in the first line, the “US$43.6 billion” isn’t earnings, but revenue.

skipaq

They are both intended to reward investors while slowing the growth of cash on hand. The stock buy back hypothetically should prop up the share price. It has the potential to return more to investors than dividends. That is based on supply (fewer shares will be available to trade) and demand. The demand part of this equation will reveal itself in time. How this is viewed and acted on depends on the type of investor one is. As to why the buy back is much higher than the dividend; I can only speculate that Apple wants the same thing that Wall Street wants. That is to increase the share price or at least create the climate for the price to go up.

Hagen

The 15% dividend increase will take the yield on the stock from 2.6% to 3.0%—more than HP offers, but slightly less than Microsoft.

The share buybacks will go to removing shares of AAPL from the common market. If share prices stays around $400 then the $50 billion will translate to roughly 125M shares—13%—of the total outstanding stock. As those shares are taken off the market, share price should adjust upwards by a similar amount.

A key on one vs. the other is that the dividends are a continuous reward to shareholders. Investors can purchase their shares later and still get a dividend check every 3 months. Share buybacks are only accessible to people who already own shares of AAPL, and are willing to sell them. (That’s not much of an issue, since around 20 million shares - 2% - are traded each day.) The buybacks were previously in place only to offset new shares sold to Apple employees and senior management.  Now the company will actively reduce the share count.

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