Apple Inc CEO Tim Cook, moving swiftly after taking over from the late Silicon Valley icon Steve Jobs, fulfilled a longstanding desire of investors by initiating a quarterly dividend and share buyback that will pay out $45 billion over three years.
The world's most valuable technology company will start paying its first dividends since 1995 - a regular quarterly payout of $2.65 a share - in July, and buy back up to $10 billion of its stock beginning in the next fiscal year. The $10 billion annual dividend program, which Cook said will be reviewed periodically, ranks among the largest current US corporate cash payouts. Yet it disappointed some fund managers, given the immense war chest Apple boasts, and a 1.8 percent dividend yield that lags the S&P 500 average.
Cook told analysts on Monday that "making great products" remained top priority, echoing the sentiments of his former boss, who died last October after a years-long battle with cancer. Jobs' former lieutenant has impressed Wall Street since taking the helm. He made his mark revealing Apple's production partners and initiating investigations into allegations of labour abuse in its supply chain, and addressing investors directly at this year's Goldman Sachs conference. But the question of whether the operations maven can envision revolutionary products still lingers for some.
Cook's move came less than a year after he was appointed head of the company and suggested to many a move away from Jobs' era, when a dividend was often mentioned but not acted upon. "Already we are seeing more openness, and more willingness to address issues on many different fronts under Tim Cook than we had seen in the past," said Connor Browne, portfolio manager of Thornburg Value Fund.
When Cook was announced as CEO, Wall Street feared he lacked Jobs' vision for devising ground-breaking consumer electronics. But Apple's shares have gained more than 50 percent since Jobs' death and set a record above $600 last week as investors noted the assurance with which Cook has taken the reins. The former IBM executive oversaw the rollout of the iPhone 4S last year and presided over what he said on Monday was a "record weekend" of sales for the new, 4G-enabled iPad.
"Innovation is the most important objective at Apple and we will not lose sight of that," Cook said. But many investors await an Apple TV or similar: a gadget that will transform an industry the way the iPhone did. On a conference call, one of the first questions that cropped up regarded the product pipeline. Cook declined comment. Apple shares were up 2.3 percent at $598.99 at midday. "One of the risks with Apple in particular is that they have very little in recurring revenues. Most of the revenue is new sales, which means that innovation is absolutely critical," Oliver Pursche, manager of the GMG Defensive Beta fund."
The company's pipeline - which experts say Jobs put in place before his death and will last the company for years - seemed to be going strong. AT&T said on Monday it racked up a single-day record last Friday for activations with the new iPad. Verizon Wireless is the other carrier for the device, which analysts expect to be well received by consumers because its 4G capabilities and sharper "retina" display will attract users keen on streaming multimedia on the go.
Apple expects the share buyback program to run over three years, with the primary objective to offset the impact of employee stock options and equity grants. Its annual dividend yield will come in around 1.8 percent. That ranks above Oracle Corp and International Business Machines Corp but falls just short of the average of around 2.4 percent for companies in the Standard & Poor's 500 index, analysts say. The maker of the iPhone, iPad and iPod has $98 billion in cash and securities, equal to about $104 a share, according to ISI Group analyst Brian Marshall. The company said it anticipated using about $45 billion of domestic cash in the first three years of its buyback and dividend programs. Apple last paid a dividend in 1995. In 1996, the company posted a net loss of $816 million.