Apple Announces Plans to Initiate Dividend and Share Repurchase Program

[69650]

So you pay the same rate of tax on interest and dividends? Hmm. What about capital gains? In Canada we have different rates on all three. The lower rates on dividends and capital gains are meant to encourage investment in general. The investor is compensated for some of the investment risk with more money in his pocket than he would have with interest on a savings account.

I'm not an expert on this but as far as I know interest on savings and dividends are treated as income by the UK tax authorities. Add in your salary to get your total income. Deduct your personal allowance (how much you can earn before you start paying tax) and the rest is taxable at 20% on so much and then 40% or 50% on the remainder.

Capital gains are treated differently. You pay either 18% or 28% depending on whether you are a low or high rate tax payer.

 

[xinu]

Ok, I'm sorry I was a little harsh towards you.

But with a flourishing Grey-Economy it sounds like people are at least showing some entrepreneurial spirit. That just needs to be turned into a legitimate self employed enterprise. I'm self employed and that way I can make as much money as I want to (as long as I keep customers happy) and there is no one to fire me.

I know it is expensive in Europe but Europeans also have very high standards of living and good social programs. Not sure of every country involved but aren't you free to move to Denmark or Germany to take up work there? That is a level of economic freedom that many in the world don't have.

Well our health care system is cheaper than it is in US that is been studied widely in US too. In Canada, their system is close to Europe and it is working fine.

Social and health care is cheapest when it is done by the government. Private sector insurance companies and hospitals rip off people and the government here too now days because your precious McKinsey has landed here back in 1989 and things has gotten very bad since then.

For example we have private hospital here, Mehiläinen INC and it pays whopping 0.1% taxes of their income... in other words the system is inside out corrupted and disgusting.

And you cannot employ your self here. Too much regulations, laws, payments, taxes... everything is a big mess and getting worse every day.

Our economy here is collapsing as we speak and there will be lots of violence soon.

In France they are shooting jews!! Three jewish school children and a teacher was shot today! Things are getting worse every day. Molotov cocktails flying in Greece and soon in Italy and Spain too.

Europe has been continuously in war before Jesus Christ was born and it will start again.

 

[69650]

Wirelessly posted (Mozilla/5.0 (iPhone; CPU iPhone OS 5_1 like Mac OS X) AppleWebKit/534.46 (KHTML, like Gecko) Version/5.1 Mobile/9B176 Safari/7534.48.3)

Steve never had $100B to play with. They need to do something with the money. This way because of the amount of money they're making they will still grow their cash hoard and have some left over to buy up sharp or a cable company or a movie studio.
Let's wait and see what happens before we judge poor Mr. Cook, he's probably having trouble trying to fill the shoes of Steve, and no doubt he knows Steve's fans don't have much nice to say about him

I agree that they had to do something with the cash but wouldn't it have been better to make some bold acquisitions instead which would have added to the bottom line and propelled the share price even higher? Why not buy Adobe and create a suit of pro products at more affordable prices or buy Sharp or Sony to secure components. I'm sure there are lots of companies they could buy.

 

[rotorblade69]

Sales are slow to off. Have you seen a place where they are selling out, or sold out. I haven't.

Apple knows their sales numbers for the iOS products at an Instant. Computers at an instant. If its a gift it might take it some time days maybe but they know within a matter of hours when an iOS product was sold 95% of the time.

 

[deconstruct60]

Could anyone explain the $10 billion buyback part of this? What does that actually mean per share to an investor? It's separate from the 2.65 per quarter ($10.60/year) dividend - correct?

It is separate from the dividend.

The buyback means that the company, when it makes sense, will use some portion of the buyback money to acquire Apple stock. There is an implicit assumption that Apple will buy the stock floating on the open market. More buyers of the stock tends to drive the price up ( more buyers than sellers makes stock prices go higher. ).

However, a couple of real issues for real stockholders.

1. Apple does not necessarily need to go to the open market to acquire shares. For instance, some Apple employees will sell Apple shares they have been given as compensation. If Apple is not buying those those would float out onto the open market. That's called dilution. That is actually the opposite of a buyback. More shares out means prices can go down.

So if Apple buys 100% of the shares the employees let go then no dilution. However, there is also no change in the number of shares on the open market either. Net effect is nothing for the stockholders.

I don't think the employees are going to dump $45B in stock over next 3 years so there will be some removable of shares. Some of it is cancelling dilution Apple has effectively put in over the last 10 years though.

This buyback can save Apple money if the stock continues to ever increase. Buying $500 stock now and handing it to employees as compensation later when it is worth $600 means that Apple doesn't have to spend $600 later to "buy it to give away". ( Yeah sure they could "dillute to give away", but again that is punishing the stockholders. )


2. It means the stockholders are still not going to get any part of the $100B hoard that is there now. In part, this is cut off the inevitable lawsuit that would increasingly have traction if Apple continued to hoard every larger amounts for no good reason. (they have no intent to spend... just hoard. )
The buyback takes the air out of that balloon.


3. Apple can "smooth out" fluctuations in the stock price. If the market panics for no good reason Apple can "prop up" the stock until the market comes to its senses. ( e.g., Iranians rattle the cage and shoot off a test missile ... folks freak out .... oil prices go up. Iranians happy again... things go back to normal. )


Big picture though.... buybacks usually aren't very effective as a long term mechanism . They have some traction when the market's perception of the company are grossly flawed to the negative. In Apple's case, if anything, the stock is over inflated, not under. [ The implied long term growth numbers for Apple aren't really tractable. But as long as there is someone else willing to pay higher the stock will go up. ] However, the buy back can goose that along a bit longer.


http://www.buffettsecrets.com/share-buy-backs.htm

 

[rdowns]

Could anyone explain the $10 billion buyback part of this? What does that actually mean per share to an investor? It's separate from the 2.65 per quarter ($10.60/year) dividend - correct?

OK, so the 'buyback' aspect of this means nothing per share to us. I.e.; no extra money. Right? We only get the 10.60 per share yearly.

Apple awards shares and/or options to employees as part of their compensation. Every time Apple awards a grant to an employee, the outstanding shares are diluted as more shares are available. A buyback insulates the shareholder against dilution as stock and/or option are awarded.

 

[Rogifan]

I agree that they had to do something with the cash but wouldn't it have been better to make some bold acquisitions instead which would have added to the bottom line and propelled the share price even higher? Why not buy Adobe and create a suit of pro products at more affordable prices or buy Sharp or Sony to secure components. I'm sure there are lots of companies they could buy.

What large companies did they acquire when Steve was CEO? Their acquisitions were always small and strategic. Not sure why they'd need to purchase a supplier to secure components.

 

[bretm]

Someone with $10,000 worth of AAPL shares would have quarterly income of $45. Not great is it. Just don't see the point if they're trying to give long term investors income! Will just make the price go up higher but no real gains from that.

Some people would be quite happy these days if their stock made 2% per year. But you're complaining that they're giving out nearly 2% per year and you don't even have to sell the stock? Glad you're not my broker or analyst. Why don't you go look at what a CD is paying right now.

 

[Cybbe]

Could anyone explain the $10 billion buyback part of this? What does that actually mean per share to an investor? It's separate from the 2.65 per quarter ($10.60/year) dividend - correct?

It doesn't matter for the shareholders*: its just a different way of distributing cash. In certain cases tax treatment can be different, and it does affect the capital structure and thus certain financial ratios. Not something you should worry about unless you care deeply about corporate finance and equity research.

edit: * to clarify, the net effect on the shareholder wealth is the same: they receive the same gain in wealth, all else equal.

http://www.investopedia.com/exam-gu...stock-dividends-repurchases.asp#axzz1pYaAJ1ci

 

[HyperZboy]

Tim Cook just let Steve Jobs vision down with this bean counter move.

Apple has only one focus, make great products, in turn that leads to happy consumers and the shark leeching share-holders get their money.

Jobs would never consider such a pointless move.

I disagree. I think it's embarrassing that Apple hasn't issued a dividend in a such a long time with so much cash on hand. It's beyond greedy.

It shows how cheap Steve Jobs was and how arrogant towards investors in my opinion.

Remember, we're talking about a guy who didn't acknowledge or support his own kid for a very long time as well.

So I think Tim Cook has made the decision that this is long overdue even though it's something Steve Jobs would not have done because in the long term it will be good for the company's stock and value.

The jury is still out though on whether any of Steve Jobs vision has rubbed off on Tim Cook yet as all of these products were already in the pipeline while Jobs was running the company.

 

[deconstruct60]

I agree that they had to do something with the cash but wouldn't it have been better to make some bold acquisitions instead which would have added to the bottom line and propelled the share price even higher?

But it wouldn't. Almost every very large acquisition Apple could make would be acquiring a company with lower profit margins. Or less steady long term revenue prospects. It also means more people added to cover a larger group of products over a broader market.

Acquiring would boost "top line" numbers but it wouldn't boost bottom line numbers at the same rates that organic (internal) growth currently does. There is zero reason to appeal to non-internal growth when growing at a relatively high rate. There is perhaps a bit of freak out where Apple would have to invent top line growth to match some of the expected revenue growth built into the stock price but they don't really "need to" do that until the internal growth rate cools off alot.


There is no way Apple can soak up the parts suppliers without going into the part supplying business. They don't want to be in the part supplying business. That's not what they do.

So buying Adobe would mean they'd have to keep all of the non OS X and iOS aspects of that business. Shipping Windows programs. Creating programs for Android etc. etc. They is no way they could generate a 5-8% return on those businesses if they killed off the non Apple parts and just increased the amount of proprietary Apple focus.

That's one reason why Apple buys relatively small stuff. Low number of people added. If they happen "kill off that business" to re-purpose it to a different Apple agenda, then it is just 'noise' on Apple's balance sheet.

 

[Cybbe]

That's capitalism for you. Its not great but its certainly better than all the other options out there. They're a business, their goal is to make the most money they can.

Well yes, but their arguments for a tax holiday are ridiculous, and should absolutely not be heeded (and I'm far from being a US taxpayer). If they choose to hoard their cash abroad: fine. However it should not escape taxation.

And I don't think a tax holiday, which is a form of government subsidy, has much to do with capitalism.

 

[IJ Reilly]

I cut the sentence below from the draft of the press release. I'm sticking to my assertion that it is $2.65 per quarter. I guess I'll find out later in the year.

"Subject to a board declaration we plan to initiate a quarterly dividend of $2.65 per share beginning in the September quarter."

I believe you are right, but the wording isn't as clear as it could be. If they'd stated the dividend as $10.60 per share paid quarterly, or stated the yield based on last week's close, it would have been much more apparent. One story I heard on the radio this morning certainly had it confused.

 

[Rocketman]

Dividend dates

3-19-12 Announcement of $2.65/Q/share dividend.

Begins quarter ending September 30 2012.

Announce ex-div date and pay date with earnings announcement with quarter ending June 30 2012, probably around July 16 2012.

Rocketman

 

[jlc1978]

Another way of saying it: Anyone with 100 shares gets a free Mac Mini every year!

Kind of sounds better when you put it that way. For people who bought stock expecting NO dividend, that's not a bad gift.

Not free - the stock will drop ex-dividend anyway.

Also investing in distribution around the world, and (in a)direct enterprise sales force

Could it be Apple will finally take the enterprise market seriously and actually put some effort into bringing out features it values and needs?

 

[IJ Reilly]

3-19-12 Announcement of $2.65/Q/share dividend.

Begins quarter ending September 30 2012.

Announce ex-div date and pay date with earnings announcement with quarter ending July 30 2012, probably around August 14 2012.

Rocketman

Where did you get the ex-dividend date, or is that a guess on your part?

----------

Not free - the stock will drop ex-dividend anyway.

A dividend paying stock tends to rise a bit before ex-dividend and fall a bit afterwards. The ex-dividend effect washes out.

 

[iDisk]

I disagree. I think it's embarrassing that Apple hasn't issued a dividend in a such a long time with so much cash on hand. It's beyond greedy.

It shows how cheap Steve Jobs was and how arrogant towards investors in my opinion.

Remember, we're talking about a guy who didn't acknowledge or support his own kid for a very long time as well.

So I think Tim Cook has made the decision that this is long overdue even though it's something Steve Jobs would not have done because in the long term it will be good for the company's stock and value.

The jury is still out though on whether any of Steve Jobs vision has rubbed off on Tim Cook yet as all of these products were already in the pipeline while Jobs was running the company.

This move by Tim Cook only helps ONE group of people (Leeches/Investors). Despite your feelings towards Steve Jobs, he did things that Helped Apple and then the consumer and then the sharks/leech investors (If the consumers bought the products the leeches got paid).

Besides the leeches, how does this move really help apple with product vision?
How does this grow innovation and focus on products that matter?

It doesn't... Steve knew what was best for apple and he gave Tim Cook the reigns to go forward with the vision. Sadly Tim is allowing his MBA bean Counter mentality to dictate Apple's cash.

Again this move doesn't help the consumer nor Apple's product line-up. This move caters to leeches who will hold Apple to the fire if things go sour.

Steve had a vision of at least 5 years for the company, Apple should stick to it. Tim isn't keeping to Steve's vision.

 

[antseg]

Apple will lose some value, as dividends are notorious for not providing equal stock value, i.e. shares don't raise $10.60 due to a $10.60/share dividend announcement.

So there's some value lost, obviously, which is a surprise to Apple. Cook is somewhat more businesslike, so I guess this simply was a way to appease large investors. Usually Apple is like Billy Beane of the Oakland A's, making smaller purchases that it hopes will be strong long-term gains that fit into it's current model and do a specific task.

I own Apple shares so I'm pretty excited about this from a personal perspective, but honestly I never bought Apple shares because I thought I'd get a dividend. Share appreciation has made me enough money for me to be happy. Would rather them continue what has worked for the past few years and keep their money for purchases. Hope this is a "we have too much cash so might as well" move rather than a "we have too much cash and nothing to do with it" move.

Steve had a vision of at least 5 years for the company, Apple should stick to it. Tim isn't keeping to Steve's vision.

This was definitely talked about between Cook and Jobs. Despite this vision of Jobs the innovator and magician, he also was a businessman and had to answer to shareholders. This was a move that was discussed—probably in depth—before Jobs' passing.

And, considering consumers are purchasing Apple products at record numbers, they really don't need to do anything for the consumer right now. They answer to shareholders (owners of the company), not the customers.

 

[IJ Reilly]

This move by Tim Cook only helps ONE group of people (Leeches/Investors). Despite your feelings towards Steve Jobs, he did things that Helped Apple and then the consumer and then the sharks/leech investors (If the consumers bought the products the leeches got paid).

Besides the leeches, how does this move really help apple with product vision?
How does this grow innovation and focus on products that matter?

It doesn't... Steve knew what was best for apple and he gave Tim Cook the reigns to go forward with the vision. Sadly Tim is allowing his MBA bean Counter mentality to dictate Apple's cash.

Again this move doesn't help the consumer nor Apple's product line-up. This move caters to leeches who will hold Apple to the fire if things go sour.

Steve had a vision of at least 5 years for the company, Apple should stick to it. Tim isn't keeping to Steve's vision.

A dividend has nothing whatsoever to do with "product vision." Even with the dividend, the company will still be adding $40-50 billion to the cash hoard annually. It hardly makes a dent. In reality the question of how the company will use all that cash will continue to be raised since the accumulate rate has hardly been touched with this move and the company hasn't made any serious effort to reinvest it in growth to date.

Have you read the biography? If you did, you'd know that Steve did not always know what was best for Apple. For all his good points, he had more than his share of eccentricities. Hoarding cash was one of them. It wasn't a good business practice just because Steve did it.

I salute Tim Cook for leading the board on this decision, one they obviously could not make when Steve was with us. Cook is running the show now. He'll probably be a more conventional CEO than Steve, and at this stage of the game for Apple, that's a good thing.

 

[GfPQqmcRKUvP]

Hmmmm.

Hastily Called Weekend press conference??!?!!?!?!?!?!?!?!?
Why not wait until the shareholders conference call.
Buying back stock at an all time HIGH!!!!!???!?!?!?!?!?!?!
Doesn't make sense unless they had to.

In short sales are SOFT. Its the only reason Sales were way off expectations.

Buying back stock is how they will pay executives while the shareholders Nuked.

The tech area reminds me of March 2000

The market is full of HFT and little volume or Liquidity. Don't stand under this or you will be crushed when it falls.

DISCLOSURE: NO POSITION

So there's HFT AND no liquidity? Well wouldn't that be interesting.

Anyway, it's very amusing reading everyone's comments on how Apple is wasting its money on dividends. The whole point of a public company is to return money to shareholders! That's its purpose.

 

[RedCroissant]

Boring?

Their plans might sound boring but don't forget that the products that they're making for this year have already been invested in won't be affected by this decision. They also said that these plans with the $45b will be over the next three years and with the plans for guying back their stock next fiscal year(which goes from September 2012 to October 2013).

I would still buy: Clearwire, T-mobile, Netflix, and AOL/Time Warner. Dedicated phone carrier, wireless 4G available in a bunch of cities, and a cable network with a quite usable fiber optic network.

 

[Bubba Satori]

Tim Cook just let Steve Jobs vision down with this bean counter move.

Apple has only one focus, make great products, in turn that leads to happy consumers and the shark leeching share-holders get their money.

Jobs would never consider such a pointless move.

Two questions.
Who owns the company?
What is shark leeching?

 

[GfPQqmcRKUvP]

This move by Tim Cook only helps ONE group of people (Leeches/Investors). Despite your feelings towards Steve Jobs, he did things that Helped Apple and then the consumer and then the sharks/leech investors (If the consumers bought the products the leeches got paid).

Wait, what? The investors OWN the company, not the management. They should get a return of excess cash if Apple doesn't plan on using it in the future. Unbelievable.

Besides the leeches, how does this move really help apple with product vision?
How does this grow innovation and focus on products that matter?

More importantly, how does this PREVENT them from innovating a focus on products? Oh yeah, it doesn't.

 

[the8thark]

Could it be Apple will finally take the enterprise market seriously and actually put some effort into bringing out features it values and needs?

Apple has been doing this for years.
But it's giving business what they really need and not all their flashy wants. And it's suiting them well at the moment.

 

[KPOM]

They did manage to get in a little plug for a tax-free holiday to repatriate cash (suggesting they could pay a bigger dividend if they didn't have all that money stuck overseas).

It's worth a shot. After all, if they do pay bigger dividends, then shareholders will pay tax on it.