March 19, 2012 at 8:57 AM ET
Apple, sitting on a cash hoard of nearly $100 billion, said Monday it will begin paying a quarterly dividend of $2.65 a share this year and spend another $10 billion on a stock repurchase program.
Wall Street investors and analysts had increasingly bet that Apple would return cash to its shareholders, especially after Chief Executive Tim Cook's commented that there were "active discussions" at top levels about how to handle the growing cash pile.
Apple has been using its cash to invest in research and development, and to invest in long-term supply contracts. The decision to pay out funds to shareholders will still leave plenty of money for the company to make important investments in the future, Cook told analysts and reporters on a conference call Monday morning.
“These decisions will not close any doors for us,” he said, adding that “innovation is the most important thing at Apple and we will not lose sight of that.”
Cook also said he expects the dividend and share-buyback program to be attractive to current shareholders and draw new investors to the company’s stock.
Subject to "declaration" by its board of directors, Apple will begin paying a quarterly dividend of $2.65 per share in its fiscal fourth quarter, which begins July 1. That represents an annual payout of about 1.8 percent based on Apple's latest share price of about $585.
Apple shares, which appear to move in only one direction, have soared 50 percent just in the past four months as the company's revenues have ballooned on the latest releases of its iPhone and iPad.
Apple also announced a $10 billion share repurchase program beginning in fiscal 2013, which begins Sept. 30.
The repurchase program is expected to be executed over three years, with the primary objective of neutralizing the impact of dilution from future employee equity grants and employee stock purchase programs.
“This is even better than expected,” said Stephanie Link, head of research at investment news website TheStreet.com. While the dividend news was expected, the share buyback program was more, she said. Stock buybacks tend to help buoy share prices.
The fact that Apple, which used to hold its product development plans close to its chest under former CEO Steve Jobs, is getting more transparent about its activities, is also good news, she told CNBC.
Since the death of Jobs last October, Apple's management team has signaled that it has been considering options for the company's huge cash pile.
The dividend will cost Apple about $10 billion each year -- less than the cash the company generates annually, so the company’s cash position will continue to grow, but at a slower rate. Apple said it generated about $31 billion in cash in its 2011 fiscal year.
Investors are nervous that Apple’s strong growth may have reached a plateau. But the company insists that its product pipeline, which CEO Cook said Monday remains filled, can sustain its growth.
“We are extremely confident in our product pipeline,” Cook said Monday, adding that “customers will be extremely pleased with what comes out.”
Reuters contributed to this report.