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Apple To Pay Dividend, Buy Back Shares

Apple To Pay Dividend, Buy Back Shares
March 19, 2012 1:48PM

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Apple's dividend represents a 1.8 percent yield, which is slightly higher than other big cap tech companies and more than many Wall Street analysts had forecast for Apple, said analysts at Piper Jaffray. "While the dividend has been widely expected, we believe that [it] will make Apple viable to a broader base of shareholders," they said.

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Apple told investors Monday that the iconic device maker intends to initiate a dividend and share repurchase program beginning later this year. During the company's business quarter that begins July 1, Apple expects to begin paying a quarterly dividend of $2.65 per share.

CFO Peter Oppenheimer said Apple had about $98 billion of cash on hand at the end of December, of which about $64 billion was outside the United States. He said he expected Apple's new dividend payments to exceed $10 billion during the first year and that the company will use more than $45 billion to issue dividends and buy back stock during the first three years of the new programs.

"We are extremely confident in our future and see tremendous opportunities ahead," Oppenheimer told investors during a Monday morning conference call.

Meanwhile, Apple intends to continue making strategic investments in the company's infrastructure, supply chain and R&D programs.

"Innovation is the most important objective at Apple, and we will not lose sight of that," said Apple CEO Tim Cook. "These decisions will not close any doors for us."

Confident About the Future

The dividend payout will be the first by Apple since 1995. Cook told investors Monday that he is extremely confident in Apple's future.

"The pipeline is full of stuff, and I think our customers are going to be incredibly pleased with what they see coming out," Cook said.

Although the company sold 37 million iPhones in its latest quarter, Cook noted that Apple's unit sales only represented 9 percent of global handset shipments during the period. Given market expectations that mobile phone shipments overall will grow from 1.6 billion in 2011 to more than 2 billion by 2015, Cook sees plenty of growth opportunities for the iPhone ahead.

"It's our belief that eventually all handsets will be smartphones, so the potential for iPhone is enormous," Cook explained.

Apple sold 55 million iPads between the device's spring 2010 launch and the end of the company's most recent quarter. Cook said Apple shipped a record number of the company's new iPad models during their first weekend of availability.

"We believe that the tablet market will eventually surpass the PC market in size," Cook said. "It's just a question of when."

Cook noted that the company's Mac unit shipment growth has outperformed the PC market for 23 consecutive quarters.

"Yet we have less than 6 percent market share of this 350 million units per year market," he said.

A Broader Base of Shareholders

According to Piper Jaffray, Apple's newly announced dividend represents about a 1.8 percent yield, which is slightly higher than other big cap tech companies and more than many Wall Street analysts had forecast.

"While the dividend has been widely expected, we believe that [it] will make Apple viable to a broader base of shareholders," said Piper Jaffray analysts Gene Munster, Andrew Murphy and Douglas Clinton in a Monday investor note.

"Given Apple will still be generating significant net cash, we believe the dividend could increase by 20 percent after the first year," Piper Jaffray's analysts said.

The investment firm also views Cook's remark about record iPad shipments over the past weekend as a good indication that Apple will end up recording higher-than-expected iPad numbers for the quarter under way.

"We continue to believe the company sold over 1 million iPads on launch day, including pre-orders, and expect a slight upside to the Street's 10.2 million iPad estimate for March," Munster, Murphy and Clinton wrote.

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