You have to pay eternal attention to developments that could become a 10X factor in your business - Andy Grove - Only the Paranoid Survive
MAKER OF ITHINGS Apple has announced that it will start paying dividends again for the first time in 15 years.
Apple suspended its dividend programme back in 1996 at a time when the company was close to bankruptcy, however following the success of the Ipod, Iphone and Ipad the firm is now sitting on a $100bn pile of cash. Now the company has said that it will spend $45bn of that over the next three years by paying dividends and buying back $10bn of stock.
Apple said that it plans to initiate a quarterly dividend of $2.65 per share from the financial quarter starting 1 July 2012. Apple also said that starting from 30 September 2012 it will initiate a $10bn stock repurchase program.
Apple CEO Tim Cook said, "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. 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."
According to Apple its repurchase of its own stock will be made to counter the effects of stock dilution from future employee equity grants and employee stock purchase programmes.
Peter Oppenheimer, Apple's CFO said, "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. We are extremely confident in our future and see tremendous opportunities ahead."
Institutional investors generally view such large cash hoards as wastes of money, as bank interest rates are significantly lower than returns from well placed investments. While Apple did not announce that it will be going on a spending spree to buy up other firms, its actions suggest the company is introducing measures to improve its stability, since its meteoric profit growth is unlikely to continue forever. µ
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