Apple Dividend Policy

Andre Averill

Walter Morales

Finance 3716 Section 1

27 November 2012

Apple’s New Dividend Policy

Apple Inc. recently mailed its first dividend payment to shareholders in more than 10 years. The last dividend payment took place in 1996 before Steve Jobs retook control of the company and immediately halted dividend payments. Apple has turned away from the former CEO’s mindset and started the new dividend and buyback plan partly due to the pressure from investors, and party because they have more money than they know what to do with. While the dividend of $2.65 a quarter or $10.60 a year is a conservative one, it is significant due to the firm’s longstanding “no dividend” policy.

Dividends show sign of a firm’s health and Apple, the world’s most valuable company, is certainly healthy enough to implement a dividend and buyback plan. During a conference call, CEO Timothy Cook said he does not see a “ceiling for opportunities” and that “innovation is the most important objective at Apple and we will not lose sight of that.” Cook anticipates no loss or drop-off in spending from the company because of the dividend payout. In other words, Apple will not miss out on any possibly fruitful investments due to its new dividend policy. The move by the Apple is simply an admission that it can’t effectively spend all of its cash. The payouts notwithstanding, the company's massive cash reserves are likely to grow even larger because Apple continues to thrive, selling so many iPhones, iPads and other devices. Gene Munster, an analyst at Piper Jaffray, calculated that Apple's coffers could grow to $180 billion in two years.

The dividend payout also brings with it some perks, the first of which is happy investors. Investors simply like dividends. They like the current income that dividends provide and the dividend payment supports the enormous price tag of a share of Apple stock. The dividend payment also opens up Apple stock to a whole new clientele group. “A...