Payout does not keep pace with massive revenue

For most companies, a payout of $2.5 billion dollars (working out to $2.65 per share for each of its 935 million outstanding shares) would be manna from heaven, but for Apple the significant dividend being distributed today -- only the second such payment in the last 17 years -- doesn't even begin to match its ability to generate revenue or add to its cash stockpile. Over the course of fiscal 2013, the company will spend an additional $7.5 billion in dividends, but is likely to finish the year -- or indeed, this quarter -- with more than that amount added to its cash balance.

On top of the dividend, the company has previously announced it was spending up to $10 billion in a share buyback program, which has been formally begun but has not spoken publicly about whether it has already made any purchases. While Apple has been guarded on when it might make some stock repurchases, the recent five-month low closing price of AAPL on Wednesday would appear to represent a golden opportunity for the company, as its stock price is likely to begin heading upwards again in January when it reports sales for the December quarter.

The stock buyback program is intended only to offset shares it has awarded to executives over the past few years, as is planned to spend the money over the course of three years. Despite the fact that the dividend program was in part a reaction to pressure from Wall Street to reimburse investors from Apple's $100 billion-plus cash reserve, the dividend isn't even making a dent in the stockpile, which as of the end of Apple's fiscal fourth quarter at the end of September stood at $121.3 billion.

Investors, who have until recently enjoyed a long and upward spike in share prices, may ask the company to consider increasing the dividend both as an incentive for stockholders to hang onto their shares as well as hedge against the cash reserves growing too rapidly. Though Apple has traditionally been protective of its relatively debt-free cash stockpile -- in the 90s defending it as being necessary to stave off hostile takeovers, while in recent years saying it needed the money for selected acquisitions while avoiding excessive financing fees -- CEO Tim Cook admitted last year that the company had "more money than it needed" even account for present and future needs.

by MacNN Staff