Print 25 comment(s) - last by TakinYourPoint.. on Mar 20 at 5:32 PM

Apple plans to use $45 billion of its cash reserves over the next three years

It's no secret that Apple is a cash machine. The company rakes in billions of dollars thanks to a legion of loyal fans that lineup hours in advance to purchase its latest and greatest phones and tablets. The company has also seen a surge in its traditional PC business thanks to strong sales of its MacBook Pro/MacBook Air lineup of notebooks and iMac all-in-one desktop computers.
In late January, Apple reported profit of $13 billion on revenues of $46 billion for fiscal Q1 2012. The company saw its stock price cross the $500/share threshold in early February, making it worth more than Microsoft and Google combined. More recently, AAPL has danced with the $600/share mark. In addition, Apple has roughly $100 billion in cash/securities on hand – a figure that CEO Tim Cook said is “more than we need to run the company.”

Apple CEO Tim Cook [Source: David Paul Morris/Bloomberg]

This morning, the company announced a $10 billion stock buyback program that will start in fiscal 2013. The buyback will take place over the course of three years with the primary goal being to "[neutralize] the impact of dilution from future employee equity grants and employee stock purchase programs."
A more immediate action being taking place is a quarterly dividend starting in fiscal Q4 2012. The quarterly dividend will equal $2.65/share.
“Even with these investments, we can maintain a war chest for strategic opportunities and have plenty of cash to run our business. So we are going to initiate a dividend and share repurchase program," said Cook.
According to CFO Peter Oppenheimer, these programs will burn through $45 billion of Apple's cash reserves over the next three years.

Updated @ 5:12pm
AAPL just closed above $600/share for the first time in its history. 

Source: Apple

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RE: Investors win!
By Iaiken on 3/19/2012 9:48:14 AM , Rating: 3
Oh, and at Apple's current valuation a quarterly dividend of $2.64 is about 2% earnings per year. Not too bad.

No, it is pathetic. All of my dividend earners are in the 8-12% per share and offer a dividend reinvestment program with a 1-4% discount.

The fluctuations in the Apple stock (it often fluctuates $3-10 dollars a day) and it's high value make such a low dividend irrelevant. Apple is firmly positioned it in the realm of the day traders and automated investment computers that try to churn the stock on/between major announcements.

Further, based on Apples past four results, I would place their valuation at $440 based on their free cash flow and the massive risk of such a limited product line that is both limited in growth and incredibly vulnerable to any sort of embargo. That means they are currently horribly overvalued. One bad lawsuit in a major market and people will literally lose their shirts.

RE: Investors win!
By Iaiken on 3/19/2012 9:55:57 AM , Rating: 2
Further, at last check, Apple's P/E ratio has alawys been pretty far from the top (61st at last check). Add that when you take away their cash on hand, the physical valuation of the company is actually pretty abysmal and you start to realize that the risks Apple presents are hardly worth the risk of losing.

Even when you look at the monthly swings in the stock, you see massive downward swings of $40-60, which are indicative of just how volatile Apple's stock can be.

RE: Investors win!
By name99 on 3/19/12, Rating: 0
RE: Investors win!
By ilt24 on 3/19/2012 10:11:05 AM , Rating: 3
No, it is pathetic. All of my dividend earners are in the 8-12% per share

While I don't consider 2% high, to put it in context the 400 stocks in the S&P 500 that give dividends average 2.4%, the highest is 9.2%.

RE: Investors win!
By Iaiken on 3/19/2012 10:26:02 AM , Rating: 2
2.4%, the highest is 9.2%

I don't think you appreciate the power of 9.2% to grow your money vs 2%. The doubling time at 2%, compounded quarterly, is 35 years. The doubling time at 9% is 8 years. Factor in an additional drip discount of 2% and your doubling time shrinks to 6.1 years.

You're just looking at the wrong stocks, when you're a small investor, sometimes the best companies to invest in are likewise small as they have much more room to grow than the Apple of today.

RE: Investors win!
By ilt24 on 3/19/2012 10:52:10 AM , Rating: 2
If you want to call 2% pathetic so be it, I guess the yields offered by most stock are pathetic to you.

RE: Investors win!
By Iaiken on 3/19/2012 1:57:09 PM , Rating: 2
If you want to call 2% pathetic so be it

Look at it this way, 2% is basically enough to keep up with inflation, in which case you are still 100% dependant upon capital growth for a profit.

You're new to this whole investing thing aren't you? The bare minimum you should expect in order to make any headway and grow your money is about 5%. That is the bare minimum, anything less and you're not earning as much as you should be.

RE: Investors win!
By ilt24 on 3/19/2012 3:39:21 PM , Rating: 2
It’s amazing how you can come across as arrogant and ignorant in the same post. I’m not new to investing and overall I’m happy with the return I have gotten on my investments. If you want to pick your investments solely based on the dividend they pay out ok, to me you seem to be limiting yourself, but if that works for you great.

RE: Investors win!
By tayb on 3/19/2012 4:28:03 PM , Rating: 2
I bought 300 shares of Apple back in 2008 at $70 a share. My return on investment so far has been over 800%. 2% wouldn't entice me to start dumping more money into Apple stock though.

On the contrary I don't think this is a good move for Apple and I am contemplating taking my earnings to the bank. I would much rather them go on a spending spree buying other companies than spend $45 billion making some investors happy. I think the stock will begin to slide.

RE: Investors win!
By ilt24 on 3/19/2012 5:09:48 PM , Rating: 2
I agree 2% doesn't make me want to buy any more, but it's also doesn't make me want to hold any less. I’ve owned Apple since soon after they said the iPod would support Windows PC’s. Had they had a 2% dividend which I reinvested, that 2% would have accumulated quite nicely for me. Independent of the dividend I have considered selling some of my Apple but I’m not willing to pull the trigger yet.

I'm not sure what companies you want them to buy, they have bought many smaller companies over the years and continue to, but I’m not sure what large companies are a good fit. Sure they could by a network, record label or cable company, but what kind of return are they going to provide and do you run the risk of limited content from rivals on iTunes?

RE: Investors win!
By Iaiken on 3/20/2012 10:40:54 AM , Rating: 2
I'm not sure what companies you want them to buy

In the past there were numerous companies that I thought they should buy at the time, however, those opportunities are now gone. Instead, I stand by my assertion that Apple should have gotten into financing in order to profit off of the loan process that helps carriers put Apple devices into customers hands. Other tech firms are already going this route Rogers Communications being the most unconventional is going to do everything from corporate finance to credit cards.

RE: Investors win!
By Iaiken on 3/20/2012 10:34:48 AM , Rating: 2
I bought 300 shares of Apple back in 2008 at $70 a share.

For you to make that purchase and subsequent capital gain other investors took a $30,000 total soaking. This is what I am talking about with regard to volatility. While it's nice that you have made money off them, many other people have eaten 10-50% losses on the stock since 2008.

I think the stock will begin to slide.

Bingo! Now you're on board with the way I see this decision to pay out a pathetic dividend. If you go back to my original post you'll start to see that I was saying that this was a bad idea and that there were tons of better things to do with that cash.

RE: Investors win!
By TSS on 3/20/2012 2:13:13 AM , Rating: 2
I'd still consdiering anything below inflation not worth holding, unless you're only doing it to sell the stock at a profit.

Just because apple's is low doesn't mean others are high, either.

"And boy have we patented it!" -- Steve Jobs, Macworld 2007

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