Apple Announces $45 Billion Dividend and Share Repurchase Program

After years of speculation and advice from everyone who had the slightest interest in trading stocks and thought he knew how the biggest company in the world should spend its burgeoning cash reserves which Steve Jobs refused to return to investors in the form of dividends, Apple finally made an official announcement regarding its dividend and share repurchase program, under the leadership of the new CEO, Tim Cook.

Apple currently has more than $100 billion in cash, cash equivalents and marketable securities, which is more than any other company. Almost 20% of its stock price is derived just from its cash reserves. However, most of it is trapped overseas, which means that Apple can’t bring it back to the U.S. without a huge tax bill.

Even though I’d rather have Apple keep my money as an investor (if I were one) and continue to make some strategic acquisitions to keep growing as fast as it historically has, the demands for a dividend were rising, at least from the most vocal ones, and were likely valid, as most acquisitions usually fail and destroy aggregate shareholder wealth, and even if it planned to make a series of acquisitions like Quattro or Anobit, they would cost a fraction of its total cash reserves.

Today, Apple announced a divided repurchase and share repurchase program, and expects to give back around $45 billion to its investors over the next three years.

It has initiated a $10 billion share repurchase program, which will commence in FY13 and be executed over a period of 3 years. This will be timed to neutralize the impact of dilution from future employee equity grants. It also plans to start giving out a quarterly dividend of $2.65 per share starting Q4 FY12.

“We have used some of our cash to make great investments in our business through increased research and development, acquisitions, new retail store openings, strategic prepayments and capital expenditures in our supply chain, and building out our infrastructure. You’ll see more of all of these in the future. 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 Tim Cook, Apple’s CEO.

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