Apple will pay its investors billions of dollars over the next three years in quarterly dividends and share buybacks, but some of them aren’t happy
Apple’s Tim Cook has a problem that any chief executive would love to have: since Steve Jobs’ untimely death, the company is making so much money it doesn’t know what to do with it.
So Cook (pictured) has told Apple’s investors that it will shell out $45 billion to them over three years in quarterly dividends and share buybacks.
That is almost six times the entire market value of BlackBerry maker Research In Motion, and 38 times the value of Carphone Warehouse.
When you are vying for the position of the world’s most valuable company with Exxon Mobil, as Apple is, such awesome payouts are possible.
It’s yet another sign that Apple is way ahead of the competition in the smartphone game right now.
Some greedy investors weren’t happy with the payout, even though they have seen their shares catapult from $110 to $600 in the past five years.
That’s because the company is sitting on a war chest of close to $100 billion, has not paid dividends since 1995 and even with its new payout policy will offer a measly dividend yield of just 1.8 per cent.
Apple made clear to them that it had limited the scale of the shareholder payout because it could have been stung by the US taxman if it had tapped into the $65 billion of its cash and investments it holds overseas.
It’s a tricky balancing act for Cook, who has been under severe pressure to return cash to shareholders ever since he took the reins.
Credit rating agency Moody’s added to that pressure this month by revealing that Apple could account for more than 10 per cent of America’s corporate cash pile by the end of the year.
Innovation still key
By hoarding some of that cash for other opportunities Cook appears to be sending a signal that Apple is still focused on researching and developing the next big thing in smartphones, tablets, personal computers and other consumer electronics.
He told analysts last week that “making great products” remained Apple’s top priority, echoing the entrenched philosophy of Jobs, who died last October after a protracted battle with cancer.
“Innovation is the most important objective at Apple and we will not lose sight of that,” Cook declared during the conference call. “These decisions will not close any doors for us.”
It was an important message because some on Wall Street still think Cook, who was previously Apple’s chief operating officer, is too much of a nuts-and-bolts kind of guy to produce the levels of inspiration that the visionary Jobs did.
And when tech companies start paying dividends it’s normally a sign that their best growth is behind them.
Time will tell whether this is as good as it gets at Apple but right now the company is on an incredible roll.
This week it also revealed it had flogged three million of its latest 4G-enabled iPads in the first weekend of sales – evidence that the tablet is here to stay.
The first iteration of the iPad took 80 days to reach that number when it was launched two years ago. Since then millions have become hooked on the device.
It’s one of the reasons that since Jobs’ death Apple shares have defied the doubters and risen by more than 50 per cent.
Investors are betting that the next sector-changing device it comes up with will be an Apple TV. They know that Apple relies heavily on new sales and has few recurring revenues, which means it has to keep coming up with the next big thing.
With the shares as high as they are, the pressure to do so is now greater than ever.