Apple to pay out first divi in 17 years

The company has finally announced what it's going to do with the $100bn it has lying around. And it's something Steve Jobs might not have liked.

by Emma Haslett
Last Updated: 25 May 2012
Over the past few months, Apple has been faced with the altogether rather lovely problem of what to do with the $97.6bn it has had sloshing around in its bank account. It has been quite a conundrum, but now the company has finally made its mind up. It’s going to give it back to its shareholders, paying out a quarterly dividend of $2.65 per share from July, and buying back $10bn (£6.3bn) of its own shares, beginning at the end of September. It’s the first time Apple’s issued a divi since 1995 - its late boss Steve Jobs being less than keen on the idea, as he was haunted by the prospect of the firm running out of cash, as it nearly did once back in the bad old days.

By all accounts, the company had been under pressure for some time from its shareholders to do something about its cash pile. Obviously, a divi had been their preferred option. But while, for most tech firms, a payout to shareholders tends to signify that they’ve run out of ideas, CEO Tim Cook insisted Apple’s just as innovative as ever. 'We have used some ofour cash to make great investments in our business through increased research and development, acquisitions, new retail store openings, strategic prepayments and capital expenditures on our supply chain, and building out our infrastructure. You’ll see more of all these in the future,’ he said.
 
It’s not as though investors particularly needed the incentive: Apple’s share price hit $600 a few days ago, pushing its market cap to more than $500bn – twice the value of bitter rival Microsoft. Since the beginning of this year, share prices have gained 45%, adding more than $180bn to the company’s value. Compare that with the last time the company paid out a divi, when shares were trading at just $10, and you can see just how far the company has come.

The payment also marks a coming of age for Apple in a way - any other mature firm that was even half as successful would probably have been paying a divi already. Although even so, it will only pay out $45bn over five years, and since it generates well over $30bn a year in cash it will still have more left in the bank at the end of the year than it does now.

Part of the reason behind Apple’s growth this year has been the success of the iPad 3, three million of which have been sold since the device’s launch on Friday – the first iPad took 80 days to hit that number. So don’t expect the company’s stratospheric growth to abate any time soon: as John Jackson, from CCS Insight, pointed out: 'This should continue to bolster the soaring share price.’

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