On March 19th, Apple announced that it would give dividends and buyback about $10 billion dollars of stocks a year for the next three years. Apple has approximately $100 billion in cash and will begin to pay a quarterly dividend of $2.65 a share beginning in its fiscal fourth quarter, which begins on July 1st. On September 30th, which is the beginning of the 2013 fiscal year, the company will begin buying back shares. The dividends will attract more investors who only look for companies that give dividends. The stock repurchases will increase the earnings per share and will prevent earnings-per-share dilution caused by future employee stock grants and purchase programs. Apple has stated that it will use domestic cash holdings to pay for the dividend payments and stock repurchase program instead of using overseas funds due to repatriation tax penalties.
Apple hasn’t paid dividends since 1995. Steve Jobs returned to Apple in 1997 when it was near bankruptcy and brought the company up. Jobs opposed the idea of giving dividends, but with Tim Cook as the CEO, Apple is changing. This change has worried some investors, but Cook has reassured them that there is plenty of money to finance the product pipeline and insure innovation.
Apple dividends would make it one of the top dividend payers in the nation, but in comparison to percent annual yield per stock, it is relatively low at 1.8%. One key reason that Apple dividends may not attract investors as much as other companies is that the percent annual yield is so low. Many investors buy stocks with dividends to later reinvest that money into more shares, but with Apple at such a high stock price and such a low dividend yield, it would be impractical to do that.
If you are thinking about buying Apple shares because of the dividends and share buybacks, that may not be the best reason to purchase shares. If you are thinking about buying Apple shares because of large revenue growth rate, then that is more realistic.
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