Apple on Monday finally offered up some plans for its nearly US$100bn war chest, and it’ll almost certainly please the company’s shareholders.
The company announced that it will initiate a quarterly dividend of $2,65/share beginning the fourth fiscal quarter (beginning 1 July), as well as a $10bn share repurchase programme starting in Apple’s fiscal 2013, which begins on 30 September 2012. Overall, Apple expects to spend $45bn over the next 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. You’ll see more of all of these in the future,” Tim Cook, Apple’s CEO, said in a statement today. “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 programme.”
Monday’s announcements fall in line with what many were expecting. By offering a dividend, Apple is putting cash directly in the hands of its shareholders. But the method has been criticised because it’s relatively inefficient, since shareholders will have to pay taxes on the dividends. Buying back stock is more tax efficient, but could end up being problematic for Apple since its stock is currently at an all-time high.
It’s also notable that Apple is only relying on its domestic cash stockpile for the dividend and share buybacks. If the company tapped into its cash reserves overseas, it would have had to hand over a healthy chunk to the US government in taxes.
“Repatriating the cash from offshore would result in significant tax consequences under current US laws,” Apple chief financial officer Peter Oppenheimer said during a conference call today.
Oppenheimer said that the company is aiming to attract new investors and offset dilution from employee-restricted stock. He said that Apple expects its dividend payments to be more than $2,5bn/quarter, adding up to over $10bn/year.
Apple shares were up more than $10, reaching $596,16 in pre-market trading on Monday.
Cook also briefly mentioned that the new iPad had a “record weekend” for sales, but he didn’t elaborate further, since that wasn’t the focus of the call. — Devindra Hardawar, VentureBeat
- Image: MarketBeat (used with permission)
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