Apple to issue dividends, repurchase shares from $98b cash balance

Apple will use its massive cash balance of US$98 billion to issue dividends and repurchase shares, it announced yesterday in a move that expresses full confidence in its future.

Apple will issue a quarterly dividend of $2.65 per share at some point in the fourth quarter of its fiscal 2012 beginning on July 1. The company also wants to repurchase shares to neutralise the impact of dilution related to the employee stock option programs.

The company has a substantial cash balance thanks to the success of the iPhone, the iPad and Macs, said Apple CEO Tim Cook on a conference call. Company growth will be helped as the tablet and smartphone markets continue to flourish, Cook said.

“We are participating in some large and growing markets, and we see some significant opportunities ahead of us. The pipeline is full of stuff,” said Cook.

Apple will become one of the largest dividend payers with the new program, said Peter Oppenheimer, chief financial officer at Apple. The program is also a way to attract new investors and expand the shareholder base, Oppenheimer said.

The company expects to use $45 billion of its U.S. cash balance in the first three years of the programs. The company has $64 billion in cash outside the U.S. and about $34 billion in the U.S.

The company has already made some significant investments and the future is very promising, which gave the company confidence to initiate the stock repurchase and dividend program, Cook said. Even after the stock repurchase, taxes and dividends, there will be plenty of cash on hand to run the business and invest in strategic areas, Apple executives said.

“That’s plenty of cash to run the business,” Oppenheimer said. The repurchase program is planned for the next three years, and the company’s dividend plan is subject to declaration by the board of directors, and will be continuously evaluated.

The company has been investing cash in research and development, acquisitions, opening stores and to build out the supply chain, Cook said.

Apple more than doubled its profits in the first fiscal quarter of 2012 that ended on Dec. 31, which was the company’s first full quarter under Cook, who took over from Steve Jobs late last August. Apple earned a net profit of $13.06 billion, growing from $6 billion in the year-ago quarter, while revenue grew to $46.33 billion from $26.7 billion a year ago. Apple sold 37.04 million iPhones in the quarter, up 128 percent from the same quarter a year earlier, and 15.43 million iPads, up 111 percent. Mac sales totaled 5.2 million units, up 26 percent.

The iPhone market will continue to grow along with smartphone shipments, Cook said. IPad shipments totaled 55 million last year and will also increase, Cook said, citing Gartner’s projection of tablet shipments reaching 325 million by 2015.

“We believe the tablet market will surpass the PC market in size. It’s a matter of time,” Cook said.

The programs will have no future impact on the company’s product plans, but are a great move for the company in the long run, said Shaw Wu, senior research analyst with financial analyst firm Sterne Agee.

“This is something we’ve been asking for some time. Looks like the management is listening. We think this is great for shareholders and employees,” Wu said.

Apple’s stock price was at $592 on Monday morning, shy of the $600 mark it passed last Thursday. Canaccord Genuity technology analyst Michael Walkley last week raised the stock price target for Apple to $710 after projecting the new iPad, which became available last Friday, will help the company maintain a dominant share in the tablet market. Walkley wasn’t immediately available for comment.