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We all know Apple has been making crazy bank all over the world, even before what CEO Tim Cook called "a record weekend" selling its new iPad. Most of that money's been reinvested in the business, through products, infrastructure and even the occasional acquisition. But much of it has just been socked away, piling up in a giant hoard of cash and its equivalents: $97 billion. A strategic reservoir; a beautiful problem.
In a Monday morning conference call, Tim Cook and Apple CFO Peter Oppenheimer announced a plan to redistribute some of that reservoir back to the company's shareholders. Beginning in July and every quarter thereafter, the company plans to issue a dividend of $2.65 per share, distributing an estimated $10 billion in the first year. Add a three-year, $10 billion stock buyback program, and Apple estimates it will use about $45 billion of its domestic cash reserves between July 2012 and October 2015.
"We don't see ceilings to our opportunities," said Cook. "Even with these investments, we can maintain a war chest for strategic opportunities and have plenty of cash to run our business." The dividend and buyback program, Cook added, would provide income to current shareholders and broaden Apple's investor base.
In short, the dividend means that buying Apple stock now offers more rewards for long-term, buy-and-hold investment, rather than speculating on rising share price alone. Apple might not yet be part of the Dow Jones index of blue-chip industrial stocks, but between its market cap, its sterling performance in a down economic market, and now its quarterly dividend, it has effectively graduated to that elite status.
The conference call, announced on Sunday, was explicitly dedicated to the dividend and share buyback announcement, but that didn't stop analysts from asking about current and future products in the Q&A. When Barclays' Ben Wright framed a question about Apple's future product pipeline by noting, "I know you guys don't like to announce future products," Cook laughed and answered, "We actually love to announce new products. We just don't do it in conference calls."
A few other details from Monday's call:
- According to Oppenheimer, none of Tim Cook's own unvested restricted stock units will participate in the dividend, at Cook's request.
- Cook says Apple also looked at a stock split, but that "the current information we have would suggest that there's very little support that it helps the stock."
- That bit about domestic cash reserves is important. Of the $31 billion in additional cash holdings Apple generated in 2011, about $24 billion was outside the United States, as is $65 billion of its current reserves. Apple is limited in its ability to move cash around internationally because it would have to pay a significant tax (~30%) on repatriating that money to the United States — an issue about which the company's been lobbying Congress.
Finally, Cook and Oppenheimer stressed that this announcement doesn't preclude further moves by Apple, either for its stock or its strategic acquisitions down the road. Even though it's tapping into its reservoir to make current shareholders, including many of its own employees, very happy, there's plenty left over and good reason to think there will be plenty more to come.
