APPLE HAS outlined plans to pay its first dividend in 17 years as the US technology group, sitting on a cash pile estimated to exceed $100 billion, conceded it cannot return cash to shareholders as quickly as it was generating it.
It says it will pay a quarterly dividend of $2.65 a share beginning in the quarter that starts in July.
The moves will reward investors by using up some of the company’s cash hoard of nearly $100 billion and likely attract a new group of investors to buy the stock.
America’s biggest company by market value promised to return about $45 billion to shareholders over the next three years, including $10 billion to be spent buying back shares. The payments though are unlikely to prevent the further growth of its cash mountain, which increased by $38 billion last year alone.
Apple executives indicated that they had limited the scale of the shareholder payout because the company would have faced an extra US tax liability if it had dug into the $65 billion of cash and investments held outside the country.
They also added their voices to recent calls from wealthy technology companies for a tax holiday to bring more money home, although the US treasury has stood firm against the idea in the absence of broader reform of corporate taxes.
Apple’s shares – which had already gained 45 per cent since the start of 2012 on the back of a fresh surge in sales and the launch of the new iPad – gained a further 2.4 per cent in early trading.
The rise has added more than $180 billion to Apple’s stock market value this year, lifting it to more than twice the value of closest tech rival and former nemesis Microsoft.
The decision by tech concerns to start paying dividends is often seen as a sign that they are running out of profitable new areas in which to invest, but chief executive Tim Cook has insisted that Apple still has big product breakthroughs ahead. “Innovation is our most important objective at Apple,” he told investors on a conference call. “These decisions will not close any doors for us.”
The news comes after investor pressure for Apple to pay out some of its cash and marks a return to regular payments to shareholders for the first time since 1995, when a financial crisis led it to suspend its dividend.
The brush with disaster led Steve Jobs to follow a conservative strategy after returning in 1997 to run the company he had co-founded, although pressure from shareholders was mounting even before his death in October.
In spite of surging sales of the iPhone and iPad, some investors cautioned that Apple’s run of hot products could eventually subside as rivals caught up.
“You see what happened to Sony,” US hedge fund manager Barton Biggs told Bloomberg TV. “The history of the modern world is that all . . . consumer products become commodities in the end.”
Apple will pay a quarterly dividend of $2.65 a share some time in its fourth quarter, which begins in July. The payment is equivalent to a dividend yield of 1.8 per cent, below the level paid by tech groups such as Microsoft but higher than the 1.5 per cent paid by IBM. Its estimated $10 billion dividend will be second only to ATT, in terms of absolute payout among US companies.
Benedict Evans, an analyst at Enders Analysis, said Apple was spending about a quarter of its 2011 cash generation in returning cash to shareholders. – (Copyright The Financial Times Limited 2012)
