Cash-Rich Apple To Issue Dividends, Buy Back $10 Billion in Shares

By Josh Long

Apple, the iPhone and iPad maker with stellar sales and gargantuan profits, on Monday laid out a dual strategy to return wealth to its shareholders.

The Cupertino, Calif.-based company plans to issue dividend payments to shareholders possibly as early as July and buy back $10 billion in shares over three years.

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. Youll see more of all of these in the future,” Apple CEO Tim Cook said in a statement. 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.”

Subject to a declaration by its board of directors, Apple plans to initiate a quarterly dividend payment of $2.65 per share sometime in the fourth quarter of its fiscal 2012. That quarter begins on July 1, 2012. Apple’s dividend payment would be its first since 1995, Reuters reported.

Apple also announced that its board has authorized a $10 billion share repurchase program beginning in its fiscal 2013 year, which commences on Sept. 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,” Apple said.

Analysts said Apple’s decision is a good way to distribute wealth to its shareholders.

“With Apples balance sheet flush with over $100B in cash and our expectation for strong financial growth in C2012 versus C2011 where Apple generated an astonishing $45B in cash flow from operations, we believe Apples new dividend and buyback programs are prudent ways for Apple to return value to shareholders,” Canaccord Genuity analysts wrote in a research note. “Further, given Apples profitability and growth prospects, we believe Apple will maintain a “war chest” of cash to support its longterm strategic business plans,” added the analysts, who reiterated a “buy” rating and $710 price target on the stock.

Shares of Apple were trading Monday at $599.05 as of 1:33 p.m. ET.