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TECHNOLOGY
Updated March 19, 2012, 3:41 p.m. ET
Apple to Pay Dividend, Plans $10 Billion
Buyback
Company to Maintain a 'War Chest' for Strategic
Opportunities
By IAN SHERR And SHARA TIBKEN
Apple CEO Tim Cook unveiled plans Monday to share billions of dollars in profits with
shareholders. Jessica Vascellaro stops by digits to weigh in on the company's future, and whether
it's famed founder Steve Jobs would have approved of the plan. Photo: Getty Images.
SAN FRANCISCO—Apple Inc. AAPL +2.65% unveiled its plans Monday to share billions of
dollars in profits with shareholders, although the announcement lacked the fanfare and
enthusiastic support that its popular new products usually receive.
The Cupertino, Calif., company said Monday that it would issue its first dividend in more than a
decade, paying $2.65 a share each quarter. The company also said it plans to buy back as much
as $10 billion in stock over the next three years, beginning Sept. 30, the start of its 2013 fiscal
year.
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Apple said that based on those metrics, it would spend about $45 billion of its domestic cash
over the next three years. The company, as of Dec. 31, had about $97.6 billion in cash, with
about one-third of it in the U.S.
"Even with these investments, we can maintain a war chest for strategic opportunities and have
plenty of cash to run our business," Apple Chief Executive Tim Cook said on a conference call
with analysts.
Sterne Agee predicted Monday that Apple would generate $75 billion to $80 billion in free cash
over the next four quarters.
Journal Community
The dividend payout will cost the company about $9.88 billion a year, making Apple one of the
highest such payers in the U.S. The payout also carries a yield of 1.81%, based on the closing
price Friday, landing the company short of fellow tech bellwethers like Microsoft Corp. MSFT 1.23% and Intel Corp., INTC +0.04% whose respective dividend yields currently stand at 2.5%
and 3%.
"We want to maintain sufficient U.S. cash to be able to quickly take advantage of strategic
opportunities that might present themselves, and we do not want to incur the tax cost to repatriate
the foreign cash at this time," Chief Financial Officer Peter Oppenheimer said.
Apple's comments highlight the issue of the taxes that U.S. companies pay when they try to bring
home foreign profits. Critics, like Apple and Cisco Systems Inc., CSCO +0.55% argue the U.S.
rate is too high and forces companies to keep and invest that money overseas, instead of in the
U.S. On Monday, Mr. Oppenheimer said Apple has talked about the issue with the federal
government.
WSJ's Spencer Ante and Jennifer Valentino discuss Apple CEO Tim Cook's emphasis on
innovation and future products as part of the company's announcement of a stock dividend and
buyback.
"We think that the current tax laws provide a considerable economic disincentive to U.S.
companies that might otherwise repatriate the substantial amount of foreign cash that they have,"
he said. "That's our view, and we've expressed it."
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Apple shares were up 2.4% in afternoon trading at $599.80, although it didn't appear as if Wall
Street was overwhelmed by the amount of cash the company was distributing to its shareholders.
"A lot of this has been priced in," said David Rolfe, chief investment officer of Wedgewood
Investment Partners, which owns about $150 million in Apple shares. He added that the move
was within expectations and will likely blunt, not stop, Apple's rapid cash growth. "They're still
going to have a cash hoard second-to-none."
Hersh Cohen, co-manager of Legg Mason's $4 billion ClearBridge Equity Income Builder Fund,
which focuses on dividend-paying stocks, said he had hoped for a 3% yield and wasn't excited
about the buyback plan.
"I'm somewhere between surprised and disappointed," he said, adding that Apple's dividend
yield remains below the typical yield in his fund, but that he has no plans to sell Apple shares,
which are among the fund's top-10 holdings.
"It's good they're paying a dividend, but I would say this is not a game changer," Mr. Cohen said.
While Apple's yield is below that of Intel and Microsoft, it is in line with or above that of other
tech companies, like Hewlett-Packard Co., HPQ -0.61% 2%; Cisco, 1.6%; International Business
Machines Corp., IBM -0.14% 1.5%; and Oracle Corp., ORCL +0.07% 0.8%.
All Eyes on Apple
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SmartMoney: Why Apple's 'Record' Dividend Looks Stingy
What Could Apple Buy With Leftover Cash?
Text: Apple's press release
Apple: Our Stock Is Still a Good Deal at $600
Recap: Apple's Conference Call on Dividend, Share Buyback
Digits: How Apple's Dividend Yield Stacks Up
WSJ visits iSupply's teardown lab, where Senior Principal Analyst Andrew Rassweiler has taken
apart the new iPad. He talks about the companies supplying parts to Apple as well as the cost to
produce the new tablet.
Mr. Oppenheimer said Apple would review the dividend payments periodically, but he didn't
provide a specific schedule.
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Legg Mason's Mr. Cohen said that he wouldn't hold his breath awaiting dividend increases.
Google Inc., GOOG +1.43% Amazon.com Inc. AMZN +0.25% and eBay Inc. EBAY +0.27%
are among the tech bigwigs that still don't pay a dividend. Technology companies frequently are
the most cash flush in the corporate world, as they typically don't tie up as much money in
plants, real estate, equipment and inventory as do manufacturers and retailers.
Apple in Abundance
As for the potential of a stock split, Mr. Cook said Apple examined the possibility but decided
there was little support that it would help the stock. He noted the company would continue to
look at it as a possibility and would do it if it is in the best interest of the company and
shareholders.
Mr. Cook also declined to provide specific details about sales of Apple's new iPad, which was
released on Friday; the CEO only said Monday that it was a record weekend for the tablet and
the company is "thrilled" with it.
Apple Inc. CEO Tim Cook said Monday the company would pay a dividend to shareholders and
buy back up to $10 billion in stock, heeding calls for the technology heavyweight to deploy its
massive cash pile. Tiernan Ray reports on Markets Hub. (Photo: Kevork Djansezian/Getty
Images)
Apple also said Mr. Cook had requested that none of his unvested restricted stock units would
participate in the company's dividend program.
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The decision to pay a dividend represents the latest shift for Apple, which has slowly been
becoming more transparent and investor-friendly since Steve Jobs, the company's co-founder and
former chief executive, died in October.
For example, earlier this year, the company released its list of suppliers, something it used to
keep very much hidden. It also paid for an outside agency, the Fair Labor Association, to
perform an independent audit of its manufacturing partners and report those findings to the
public.
—Jon Kamp, Matt Jarzemsky and Mia Lamar contributed to this article.
Write to Ian Sherr at ian.sherr@dowjones.com and Shara Tibken at
shara.tibken@dowjones.com
Corrections & Amplifications
An earlier version of the summary on this article incorrectly said it was Apple's first-ever
dividend. Apple last paid a dividend in 1995.
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