Apple (AAPL) Shares Soar After Dividend, Stock Buyback Announcement: Another Win For Tim Cook

OPINION

  @redletterdave on March 19 2012 3:43 PM
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Apple Logo Reuters

Apple (AAPL) shares soared on Monday after the Cupertino, Calif.-based tech company, feeling generous after a record-breaking quarter in January and a record-breaking launch weekend for the new iPad, decided to share some of its $100 billion in cash to fulfill a deep-seated desire of investors. Shares rose to about 598 when the company announced it would reward shareholders by launching a quarterly dividend and a stock buyback program that will pay out about $45 billion over three years, set to go into effect later this year.

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. You'll see more of all of these in the future, said Tim Cook, CEO of Apple. 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.

Apple, which is the most valuable technology company in the world, plans to pay out $2.65 per share each quarter and buy back up to $10 billion of its stock. Apple's 1.8 percent yield on the dividend is less than the S&P 500 market average that hovers between 2 and 3 percent, but it's still better than the yield from older tech companies like Oracle and IBM. Still, compared to two modern rival companies in Microsoft and Intel, Apple's still lags behind: Microsoft's dividend yields 2.5 percent, while Intel yields 3 percent.

Combining dividends, share repurchases, and cash used to net-share-settle vesting RSUs, we anticipate utilizing approximately $45 billion of domestic cash in the first three years of our programs, said Peter Oppenheimer, Apple's CFO. We are extremely confident in our future and see tremendous opportunities ahead.

Apple shared a live stream of its conference call with investors this morning, in which Cook informed shareholders and Apple aficionados that the company is still focused on its top priority, which is making great products.

Innovation is the most important objective at Apple and we will not lose sight of that, Cook said.

This announcement is an enormous win for Cook, who has managed to maintain the company's essence of innovation and mystery since the death of Steve Jobs in October while taking more responsibility over the company's gray areas. When Jobs was Apple's head honcho, he would avoid business that he didn't care about and bend the general conversation of the company to his will, which was just one part of his unique reality distortion field you'd hear his colleagues allude to when describing him.

Jobs never wanted to talk about mistreatment within Apple's supply chains; he just cared about making great technology and great products. Cook, on the other hand, is an expert at operations, and he has a very cool, calm hand to smooth things over.

Now that Jobs isn't here any more, the things Apple never wanted to talk about -- worker mistreatment, its place on Wall Street -- it has to. And Cook has proven that he is the responsible man to talk about it.

Since officially taking over for Jobs last August, he has opened the doors to the Foxconn factories, launched the iPhone 4S and the new iPad, and given back to shareholders. Jobs would rather keep a big red curtain hanging over Apple until it was ready to launch a new product or invention; Cook knows how to keep a secret, but he also knows that some secrets, like how a device is made, can be destructive if left unsaid.

Now, with Cook at the helm, Apple is just as creative as before, but it is also much more open with its adoring public. Cook has demonstrated that he respects Apple's consumers and fans enough to be honest with them, and with the new stock dividend and shares buyback program, he is opening the war chest for the sake of generosity. In the long run, Cook's benevolent decision will only extend Apple's good fortune for more years to come.

Listen to Tim Cook's conference call with investors here, and read Apple's press release about the dividend program, which is also attached below:

Apple Announces Plans to Initiate Dividend and Share Repurchase Program

Expects to Spend $45 Billion Over Three Years

CUPERTINO, California -- March 19, 2012 -- Apple® today announced plans to initiate a dividend and share repurchase program commencing later this year.

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.

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. You'll see more of all of these in the future, said Tim Cook, Apple's CEO. 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.

Combining dividends, share repurchases, and cash used to net-share-settle vesting RSUs, we anticipate utilizing approximately $45 billion of domestic cash in the first three years of our programs, said Peter Oppenheimer, Apple's CFO. We are extremely confident in our future and see tremendous opportunities ahead.

Apple will provide live streaming of a conference call to discuss its plans beginning at 6:00 a.m. PDT on Monday, March 19, 2012 at www.apple.com/quicktime/qtv/call31912. The Company will not be providing an update on the current quarter nor will any topics be discussed other than cash. This webcast will also be available for replay for approximately two weeks thereafter.

This press release contains forward-looking statements including without limitation those regarding future business outlook and plans for dividends and share repurchases. These statements involve risks and uncertainties, and actual results may differ. Risks and uncertainties include without limitation the effect of competitive and economic factors, and the Company's reaction to those factors, on consumer and business buying decisions with respect to the Company's products; continued competitive pressures in the marketplace; the ability of the Company to deliver to the marketplace and stimulate customer demand for new programs, products, and technological innovations on a timely basis; the effect that product introductions and transitions, changes in product pricing or mix, and/or increases in component costs could have on the Company's gross margin; the inventory risk associated with the Company's need to order or commit to order product components in advance of customer orders; the continued availability on acceptable terms, or at all, of certain components and services essential to the Company's business currently obtained by the Company from sole or limited sources; the effect that the Company's dependency on manufacturing and logistics services provided by third parties may have on the quality, quantity or cost of products manufactured or services rendered; risks associated with the Company's international operations; the Company's reliance on third-party intellectual property and digital content; the potential impact of a finding that the Company has infringed on the intellectual property rights of others; the Company's dependency on the performance of distributors, carriers and other resellers of the Company's products; the effect that product and service quality problems could have on the Company's sales and operating profits; the continued service and availability of key executives and employees; war, terrorism, public health issues, natural disasters, and other circumstances that could disrupt supply, delivery, or demand of products; and unfavorable results of other legal proceedings. More information on potential factors that could affect the Company's financial results is included from time to time in the Risk Factors and Management's Discussion and Analysis of Financial Condition and Results of Operations sections of the Company's public reports filed with the SEC, including the Company's Form 10-K for the fiscal year ended September 24, 2011 and its Form 10-Q for the fiscal quarter ended December 31, 2011. The Company assumes no obligation to update any forward-looking statements or information, which speak as of their respective dates.

Apple designs Macs, the best personal computers in the world, along with OS X, iLife, iWork and professional software. Apple leads the digital music revolution with its iPods and iTunes online store. Apple has reinvented the mobile phone with its revolutionary iPhone and App Store, and is defining the future of mobile media and computing devices with iPad.

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