AMITIAE - Monday 19 March 2012

Apple Plans for Dividends and a Share Repurchase Program

apple and chopsticks


By Graham K. Rogers


On Monday evening here I listened to the conference call on Apple's decision to issue dividends and buy back shares. I also heard the questions afterwards. There was also a press release, but that only appeared in the PR feed later.

The main points are that there is to be a quarterly dividend of $2.65 paid as from some time in the 4th Quarter 2012, and Apple will initiate a $10 billion share repurchase program starting later this year. The main reason for the buybacks is to guard against share dilution for future staff stock grants: "future employee equity grants and employee stock purchase programs."

We also read that "Combining dividends, share repurchases, and cash used to net-share-settle vesting RSUs, we anticipate utilizing approximately $45 billion of domestic cash in the first three years of our programs." The RSU was mentioned in Oppenheimer's delivery and I had to look this up. It is "restricted stock units" and he also announced that Tim Cook had asked that his not be included in this. I guess this may be an effort to appear squeaky clean as he might otherwise gain some advantage from the decisions.

A number of factors were used in the twin announcements, including the point that although Apple has about $100 billion cash, $64 billion of that is overseas and repatriation is not on the table for Apple at the moment due to the high tax liability it would incur. Tim Cook was keen to make the point that this situation has been discussed with Congress and with the current Administration in the US.

Also factored in to the decision was the question of how much would be needed for new products? Although asked about any new items coming down the line, Cook would not be drawn on this and used the same reply as he had given at the Apple Event at the Yerba Buena Center for the Arts at the recent Apple event: exciting products this year.

With the foreign funds excluded, that would leave around $36 billion of cash on what is known to be the current figure, although this takes no account of future income. Apple has calculated that and has probably been conservative on the final amounts that might be needed for investment, for unspecificied or unplanned purchases and what Tim Cook called a "War chest".

The dividend and the buybacks are expected to cost some $45 billion over three years [my italics] so the cash reserves, with replenishment, are not going to be depleted greatly.

Cook mentioned the rationale behind the decision and part was because of pressure from shareholders and advisers, so (as had been confirmed a while back) a careful analysis of all sides had been carried out and today's announcement is the result.

Shares are currently at 595.66, up some $9.59 and trading on Wall Street has only just got under way as I write this.

Graham K. Rogers teaches at the Faculty of Engineering, Mahidol University in Thailand. He wrote in the Bangkok Post, Database supplement on IT subjects. For the last seven years of Database he wrote a column on Apple and Macs.



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