Apple finally has a plan for its growing pile of cash - dividends and stock buybacks
With nearly $100 billion in cash and securities, Apple’s growing cash hoard has long been a topic of conversation and speculation amongst investors.
Earlier today, Apple CEO Tim Cook and Apple CFO Peter Oppenheimer held a conference call where finally they announced what Apple plans to do with all that cash – issue a dividend and initiate a stock buyback program.
With respect to the dividend, Apple will pay investors $2.65 a share sometime during the fourth quarter of 2011. With respect to the stock buyback program, Apple’s press release noted that the board of directors approved a $10 billion share repurchase program which will commence on September 30, 2012.
“We have used some of our cash to make great investments in our business through increased research and development, acquisitions, new retail store openings, strategic prepayments and capital expenditures in our supply chain, and building out our infrastructure,” said Tim Cook in Apple’s press release. “Even with these investments, we can maintain a war chest for strategic opportunities and have plenty of cash to run our business. So we are going to initiate a dividend and share repurchase program.”
All told, the dividend and share repurchase initiatives will gobble up approximately $45 billion of Apple’s cash through 2015. That of course sounds like a lot of cash, and it is, but keep in mind that Apple in 2011 increased its cash balance by $31 billion.
During the conference call, Cook and Oppenheimer touched on a number of interesting points.
Some of the highlights include:
– Apple still sees tremendous potential for the iPhone given that the 37 million iPhones Apple sold last quarter represented a platry 9% of all handset sales
– With respect to the recently launched iPad, Apple didn’t divulge sales figures but noted that Apple saw a record breaking weekend. “We had a record weekend and we’re thrilled with it.”
– Macs represent only 6% of the PC market, yet another area offering tremendous growth potential
– Innovation remains Apple’s top priority
– Tim Cook’s Apple shares will not be eligible for dividend treatment, at his own request
– Apple expects its divident payouts to reach more than $2.5 billion a quarter, making Apple one of the largest dividend payers in the US.
– Somewhat comically, Cook was asked about Apple’s upcoming products to which he replied, “We actually do love to announce new products, we just don’t do it during conference calls,” Well played, Mr. Cook.
– Cook did, however, add: “I am extremely confident in our future. The pipeline is full of stuff. I think our customers are going to be incredibly pleased with what they see coming out.”
– The bulk of Apple’s cash remains stuck overseas due to the tax implications of repatriating the cash back to the US
– Stock splits aren’t likely going forward
via Apple
