In a move that has many buzzing — and many Apple shareholders excited — Apple announced its plans to pay a quarterly dividend on March 19, 2012. Ever since the death of Steve Jobs, many shareholders and other have been clamoring for Apple to pay a dividend (Steve Jobs was famously against dividend payments on Apple stock). The company has been notorious for its cash hoard, and many have criticized Apple for not returning some of its huge profits to investors. The dividend policy begins after July 1, 2012, and will incorporate a $2.65 quarterly payout.
On top of paying a dividend, Apple also announced that it will be buying back shares over the course of the next three years in a $10 billion program. The news has sent Apple stock higher, to nearly $600 a share at the time of this writing. Many are excited that AAPL can now be added to the ranks of dividend paying stocks, since the company is such a solid one, and considered a premier stock.
Will Apple Maintain Its Dividend?
There are hopes by many that AAPL will increase dividends in the future, since the new CEO, Tim Cook, indicated that the dividend would be periodically reviewed and could be increased. Of course, that also means that it can be decreased. When a company announces a regular dividend, what it pays is entirely up to the company. The company can increase the dividend, or decrease it, or stop paying it altogether.
Some thought that Apple might simply announce a one-time special dividend. The fact that a regular quarterly dividend has been announced is a source of great excitement to many who have held Apple stock faithfully for years. But, if the Apple executives decide that there isn’t a big enough cash hoard, or if something happens to cause the company concern, the dividend could easily be discontinued. AAPL has been reluctant to start paying a dividend, so it wouldn’t be too much of a surprise if bigwigs at Apple decided to cut back if they feel it isn’t working out as they’d like. And, of course, if the recent iPad sales don’t go as expected, or if Apple loses some market share in the smart phone arena, it might mean a cut back.
For now, though, there are high hopes that Apple will continue to pay its dividend, and that increases might even be considered for the future. At the current AAPL prices, the annual dividend yield is 1.8%, which is lower than the yield offered by Microsoft (2.5%) and Intel (3%). The conservative yield shouldn’t be too much of a surprise, though. Even though analysts thought that AAPL would stay in line with the industry, it’s clear that Apple executives are taking it slow. They aren’t quite sure that depleting some of Apple’s $100 billion cash hoard is the right thing to do, and they want to see how things go. Besides, the announcement of the dividend payout on Monday might also help steady shares, which have been volatile since the latest iPad debute.
What do you think? Are you glad AAPL is paying a dividend?
Miranda is freelance journalist. She specializes in topics related to money, especially personal finance, small business, and investing. You can read more of my writing at Planting Money Seeds.