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Apple to Buy Back $10bn of Its Shares and Pay Dividend
floydman writes "Apple has said it will use its cash to start paying a dividend to shareholders and to buy back some of its shares. The technology giant said it would pay a quarterly dividend of $2.65 per share from July. It will buy back up to $10bn of its own shares starting in the company's next financial year, which begins on 30 September 2012. Apple CEO Tim Cook said, 'We have used some of our cash to make great investments in our business through increased research and development, acquisitions, new retail store openings, strategic prepayments and capital expenditures in our supply chain, and building out our infrastructure. You'll see more of all of these in the future. Even with these investments, we can maintain a war chest for strategic opportunities and have plenty of cash to run our business. So we are going to initiate a dividend and share repurchase program.'"
Any finance experts here? What does this buyback do? It probably makes the remaining shares more valuable, but are there any nasty angles to this?
My first Journal Entry ever, in 8 years! http://slashdot.org/journal/365947/aphelion-scifi-fantasy-horror-poetry-webzine
It looks like this will cost Apple about $10 Billion a year, but their cash position has been growing faster than that recently. So, I'm guessing all it will do is slow down the rate of growth of their cash.
Didn't Steve Jobs say something like "Apple will only pay dividends over my dead body."
Too soon?
When I was a boy of 11 or 12 years of age, I asked about how publicly traded companies and shares work. I was told that you own piece of a company through the shares, and so you receive a share of the profits, as well.
Somehow, this basic concept got completely wiped out by most hi-tech companies since then. So much so, in fact, that when Nokia or Apple does this payments, people are a bit puzzled.
"The agriculture ministry is not in charge of Gundam" - Japanese ministry official.
You're thinking like a poor person. When you're rich, you buy at whatever price, but you buy enough to drive the price up even more, usually with someone else's money first, and then you sell.
In the case of Apple and their 100 billion dollar cash on hand, they're pretty much right in principle on this though. 100 billion dollars cash on hand isn't giving enough ROI, and people can make better use of that money themselves than Apple can, if apple could use 100 billion dollars for something it wouldn't have it lying around collecting interest on overnight bonds and crap like that.
The stock buyback is pretty normal, use some of the corporate cash to drive up the paper value of the company, thereby enriching shareholders without them having to pay tax. Paying a dividend of 1.7% of the value of the stock seems like they're trying to ease into this.
you don't use the term "war chest" unless you're talking about lawsuits, either going on the attack or defense.
Or actual war. Maybe the iTroopers will march on Google.
"For every expert, there is an equal and opposite expert"
Larry Page needs to spend some time learning from Apple. I don't like Apple but I have to give them credit for one thing -- they haven't wasted billions of dollars on stupid pointless crap (driverless cars, etc) and buying a hundred companies a year that they shut down and abandon a year later.
Not arrogant enough to call myself an expert, but using made up numbers, if you had 100 shares outstanding, and $10B in the bank, this is claiming you have nothing in the pipeline....
The problem is, Apple has $100B in the bank.
You just can't spend that kind of money, not without buying solid-gold toilet seats or other absurd assets. It's ridiculous. Apple has no problem funding ongoing R&D just out of what it makes quarter to quarter. No need to dip into the corporate savings account for that.
Buying back your own stock is basically saying, "Look,we have money to invest. We could invest it in gold, or US treasuries, or orange juice futures, but we think that the best possible investment in the world is Apple stock, so we're going to buy that."
they'd just take all that cash and buy Microsoft, lop off the deadwood at the top and spin off three or four little companies to build iOS apps.
People should not fear their government. Governments should fear their people.
Well it's more like a 2% return because it gets issued quarterly.
10% yields are fairly unusual, and are typically a sign that a company is hurting. They are often the result of a big dive in a company's stock and are likely to be reduced because the thing that caused the company stock to dive is that their profits are diving - and the dividends are paid out of profits. Sometimes you see 10% dividends in highly leveraged situations or from companies that have special tax treatment. Be careful with these as these dividends can be volatile or require some gyrations on your part at tax time.
If you are a dividend investor the key thing is the long term record of increasing dividends. Apple isn't a blip on the radar compared with some of the better companies in this regard.
First off, there's no place Apple can park that cash that provides a return anything like what their own operations generate. So a dividend is appropriate.
Second, the big threat to Apple is lower prices. Apple has great margins, but that only lasts if the competition can be fended off. Hence the litigation.
The computer industry in general had this problem. For a while, it looked like the future of personal computing was $99 netbooks, sold in bubble-packs in the stationery section of drugstores. This had the industry terrified. The mobile industry saved them, by creating a direct connection between the customer's wallet and the cell phone network operator. Apple saved them by offering a premium product at a higher price point. Microsoft saved them by crushing the Linux netbook industry. What we have now are mobile personal computers that cost $3000 over the 3 years of the phone contract.
Where did you hear about this 20% percent retained earnings rule (20% of what?)? I've never heard of it. I would venture a guess that if that was a real GAAP or FASB or IASB or IRS guideline that most if not all publicly traded companies would run afoul of it. It sounds like you are conflating something related to accounting for subsidiaries with an IRS tax rule.
FYI:
Berkshire Hathaway is a publicly traded company. I have no clue why you'd think that it is not. It's stock symbols are BRK.A and BRK.B (class A and B shares, respectively). Here is a link to its SEC 10-K for 2011:
http://www.berkshirehathaway.com/2011ar/201110-K.pdf