Apple
now has $145 billion in cash and it needs to do something about
it. That’s why Apple CEO Tim Cook just announced during the earnings call that the company will initiate a stock
buyback. It means that Apple will use part of its cash to repurchase existing
shares, taking them out of the market, increasing existing stockholders’
shares. That investment will go directly to existing investors in the form of a
dividend.
Tim
Cook announced this program just after reiterating that Apple’s culture is what
sets the company apart.
“We
have a tremendous culture of innovation,” Cook said. “It’s the same culture
that bought the iPhone and the iPad,” he continued.
Last
year, Apple announced that it would spend $45 billion over multiple years to
hand out as dividends. It is more than doubling this program to $100 billion by
the end of 2015. The $55 billion that were set aside today will be used for the
share repurchases as well as dividends.
The
advantage of a share buyback program is that Apple shows that it is a confident
company because it is decreasing the number of shares outstanding. Those
programs usually boost the stock. A few days ago, Apple shares dropped below $400 after trading at $700 in September 2012. It
represents a stark downturn and something that should slightly worry Apple.
The
board has increased the share buyback authorization to $60 billion compared to
$10 billion last year. It is the largest share buyback authorization of a
public company. The quarterly dividend will be increased as wellfrom $2.65 to
$3.05. Apple will pay around $11 billion in dividend every year.
Overall, Apple
will hand out $30 billion every year. But what is even more impressive is that
the company still expects its cash on hand to grow. [Source]
You can
follow me on Twitter, add me to your circles on Google+
or Subscribe to me on facebook
or YouTube.
You can also check my website
and blog
to keep yourself updated with
what is happening in the ever changing world of technology
