Apple to pay dividend, start stock buybacks

Firm heeds calls to distribute cash

3/20/2012

CUPERTINO, Calif. — Apple Inc. will pay its first dividend in 17 years and buy back $10 billion in stock, heeding investors who urged it to return part of the $97.6 billion in cash amassed by robust demand for iPhones and iPads.

Shareholders will receive a quarterly dividend of $2.65 a share starting in the period beginning July 1, Apple said Monday. The buybacks will begin in the fiscal year starting Sept. 30 and happen over three years, the company said.

Apple last paid a dividend in 1995, before co-counder Steve Jobs returned as chief executive officer and led the introduction of top-selling products including the iPod, iPhone, and iPad.

A dividend is a boon to shareholders, including Apple employees, who have already seen the company's stock rise 48 percent this year. Fidelity Management, Apple's largest shareholder, will get $128.81 million a quarter from the dividend.

The dividend will cost Apple about $10 billion a year and represents a yield of 1.8 percent on the stock's closing price Monday.

Apple stock rose 2.7 percent to $601.10, closing above $600 a share for the first time.

CEO Tim Cook is showing more willingness than Mr. Jobs to channel cash and investments directly to investors. The move will cost $45 billion over three years, Mr. Cook said, and may broaden Apple's shareholding base by attracting fund managers who hold only dividend-paying companies.

"It was high time to do this," said David Rolfe, chief investment officer of Wedgewood Partners Inc., which holds Apple shares.

"This is something that large shareholders have been asking for," Shaw Wu, an analyst at Sterne Agee & Leach Inc., said before the announcement.

Including instances where a company has scrapped and re-established dividends, Monday's was the largest initiation for a company in the Standard & Poor's 500 Index, surpassing Cisco Systems Inc.'s announcement of a $1.3 billion dividend in March, 2011.

At 1.8 percent, the yield on Apple's dividend would be the 10th-highest among U.S. technology companies with market values larger than $10 billion, data compiled by Bloomberg show.

After Monday's announcement, Google Inc., owner of the most popular search engine, is the only technology company with a market value of more than $100 billion that doesn't pay a dividend.

Apple's growing funds on hand followed the introduction of the iPhone, the best-selling smart phone, and the iPad, the leading tablet computer.

The company last week began selling a third-generation iPad, which offers a high-definition screen and faster processor. Apple sold more than 3 million of the new iPads on their debut weekend, a record, the company said Monday.

"It's literally become a cash machine," said Charlie Wolf, an analyst at Needham & Co. in New York.

Gene Munster, an analyst at Piper Jaffray Cos., said Mr. Jobs, who died in October, resisted efforts to get Apple to return money to shareholders.

"It would have been unheard of under Jobs' watch," Mr. Munster said. "This is just Finance 101, but it looks like rocket science next to what they've done in the past."