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Annenberg School of Communication and Journalism University of Southern California

Apple to Launch a Dividend and Share Buyback Program

The new dividend will be paid quarterly at $2.65 per share and the buyback program will begin Sept. 30.

An Apple store in New York City.
An Apple store in New York City.
Apple Inc. announced Monday that it will begin a dividend and share buyback program-- a move which investors said they had been expecting since January after Apple shares were raised 37 percent when management hinted about a possible dividend.

Apple is currently the world's most valuable company, and has amassed $97.6 billion in cash and securities.

The announcement comes three days after the release of the latest iPad tablet in the U.S. and nine other countries.

If Apple had continued amassing cash and low-yielding securities, it could have eventually been subject to legal action from shareholders who could have claimed that the company was misusing their money.

Former CEO Steve Jobs voiced his opposition for years against rewarding shareholders with portions of the company's collection of cash and securities, saying the money could be put to better use. He suggested the money be saved to provide Apple with "maneuvering room," such as making the company able to buy other companies.

Before Jobs' return however, Apple did pay a quarterly dividend between 1987 and 1995.

Now, current CEO Tim Cook has stated that the company has so much cash on hand that a dividend wouldn't limit the company's ability to function freely.

On a conference call with analysts and reporters he said, "These decisions will not close any doors for us."

The new dividend will be paid quarterly at $2.65 per share and will begin during Apple's fiscal fourth quarter on July 1.

Annually, the dividend amounts to $10.60, which is 1.8 percent of the current stock price.

In comparison, media giant Microsoft Corp. pays 2.5 percent of its stock price and Hewlett-Packard Co. pays 2 percent.

Despite Apple paying a lower percentage, it will pay one of the richest dividends in the U.S. More than $10 billion will be spent on dividends in its first year, which puts it just under companies who use dividends to attract investors, such as AT&T Inc. and Verizon Communications Inc.

Apple also said that its share buyback program will launch next fiscal year on Sept. 30, and will be in place for three years.

Buybacks are frequently chosen as an alternative to dividends since they lower
the amount of shares outstanding, meaning each remaining investor has title to a bigger share of the company.

In his statement on Monday, Cook said the goal of the buyback program is to offset the shares issued to reward the Cupertino company's employees.

Cook also said the company considered splitting its stock-- which would increase the number of shares while simultaneously lowering their value-- since it could possibly give small investors the opportunity to buy stock,  but Cook said there was "very little support" for the idea.

Even with a dividend and buyback program, Apple's cash pile is projected to continue to grow. The company generated $31 billion in cash alone in the fiscal year that ended in September.

The Associated Press contributed to this report.


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