Cash-Rich Apple Inc. to Pay Dividend for First Time Since 1995

Apple announced on Monday that the company will spend part of its massive cash hoard to pay its first dividend since 1995 to shareholders and buy back $10 billion in shares.

Apple will pay a $2.65 per share quarterly dividend starting later this year, and begin a $10 billion share buyback program, the company said this morning. Photo: Markus Spiering/Flickr

Apple Inc. is going to 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.

“We don’t see ceilings to our opportunities,” despite the new payouts to shareholders, Apple’s chief executive Tim Cook told analysts in a conference call on Monday.

“Innovation is the most important objective at Apple and we will not lose sight of that. These decisions will not close any doors for us,” he said.

Apple announced it would pay a quarterly dividend of $2.65 per share from its cash balance generated from sales of its hugely successful gadgets like the iPad and iPhone.

The company will start paying the dividend payment with the company’s 2012 fiscal fourth quarter, which begins on July 1.

The $10 billion share buyback will start in fiscal 2013, which begins on September 30.

Peter Oppenheimer, Apple’s chief financial officer, said that the company generates enough cash quarterly to easily accommodate the dividend — amounting to $10 billion a year — and the stock buyback without deeply impacting Apple’s resources.

In the company’s 2011 fiscal year, Apple generated $31 billion in surplus cash.  It added another $24 billion in the first quarter of 2012.

“That’s plenty of cash to run the business,” Oppenheimer said. “We want to maintain the flexibility to take advantage of investment opportunities that present themselves.”

Apple announced that it expected the repurchase program to be carried out over three years in order to neutralize the impact of dilution from future employee equity grants and employee stock purchase programs.

Apple will spend the total of $45 billion over the next three years on these programs, including its employee stock options, said Oppenheimer.

Apple shares jumped 2.2 percent to $598.82 in early trade. Since the beginning of the year the shares have run up nearly 47 percent.

Cook painted a strong picture for the company, especially in sales of its iPhone smart phones and iPad tablet computers — the newest model of which was launched last Friday, with fans lining up from Sydney to San Francisco to snap them up.

Analysts were pleased that Apple finally decided to loosen its purse strings and pay dividends but were unimpressed with the amount, which they described as below average for successful technology companies.

Apple is earning cash so quickly that its coffers are expected to continue swelling despite paying dividends and buying back stock.

During the company’s first quarter of this fiscal year — ended December 31 — they sold 37 million iPhones, less that 9 percent of all handsets sold during the quarter.

Some in Silicon Valley saw the dividend as the first major move that distinguishes Tim Cook’s style from that of his predecessor, legendary Apple co-founder Steve Jobs who died of cancer last year.

Jobs, who rescued Apple from the brink of bankruptcy, was really tight-fisted when it came to Apple holding onto money.

“The handset market will continue to grow, to about two billion units in 2015, and increasingly will favor smartphones,” Cook said.

“It’s our belief that eventually nearly all handsets will be smartphones. So the potential for iPhones is enormous,” he added.

Meanwhile, he predicted tablet computers will soon overtake personal computers, and noticed that the iPad is well-positioned in that market.

The iPad has had “an amazing start”, with 55 million tablets sold since it was launched in early 2010.

“We had a record weekend and we’re thrilled with it,” Cook said of the new iPad launch.

US telecom titan AT&T reported that it set a new single-day record for iPad sales and activations when Apple’s latest tablet was released on Friday.

However, neither Apple nor AT&T disclosed exact sales figures for iPads.

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