Why Apple Is Giving Cash Back to Shareholders

Apple on Monday announced a solution to an enviable problem: Too much cash. But does giving money back to shareholders in the form of dividends make sense? Why not hoard it?
There are several reasons Apple is giving dividends, but the primary one is that investors feel they have a right to some of Apple’s $100 billion. “People expect a return on their investment,” says Charles Elson, director of the John L. Weinberg Center for Corporate Governance at the University of Delaware. “If you can’t do anything with the money, then you should give it back.”
Elson says that Apple is not the only company to deal with this issue. At some point, every successful public company will get pressure to give money back. (Before the recession, Exxon Mobil, Dell and Pfizer, among others, got the same kind of pressure from investors to give back their cash or find a way to invest it.) In Apple’s case, closing in on $100 billion seems to have triggered a call to launch a dividend for investors, but there’s usually no benchmark for such decisions. “It’s all up to the judgment of the board,” says Elson.
Tim Bajarin, president of Creative Strategies, says $100 billion is way more than Apple needs, so it doesn’t make sense to keep all that money on hand. He points out that even after the company pays out its $45 billion in dividends, Apple will still have more than $50 billion in cash plus whatever it puts aside in the future. “They’ll always have cash for even big acquisitions if it enhances their position,” says Bajarin, who expects Apple to start buying more companies.
During the call with analysts Monday morning, Apple CEO Tim Cook repeatedly stressed that the dividend would also attract new investors. With a share price of $600, drawing new shareholders doesn’t seem like an issue, but Bajarin notes that there’s a type of investor that is primarily concerned with dividends. “Most of the guys buying [Apple stock] today are buying on a holding basis,” says Bajarin, who notes that such investors believe Apple is a good long-term buy. “But there are a lot of people who buy stock only on a monthly basis.”
Another point Bajarin emphasized is that some 65% of of Apple’s cash is based outside the U.S. Merely bringing that money — now housed in foreign banks — back to the U.S. would force Apple to lose cash in taxes and other fees. “Apple’s not the only one,” he says. “No corporation wants to bring money back to the U.S.”
Known for its dramatic product introductions, Apple’s Monday morning announcement will probably seem ho-hum for non-investors. But, based on Apple’s stock performance Monday morning, the company has at least prompted a squib of excitement among its intended audience: At press time, the company’s stock was up about $6 or 1% at the iDividend news.

The New iPad Details Hit Apple.com

The new 9.7-inch iPad has 2048 x 1536-pixel retina display, 5-megapixel camera (with the same optics sensor from the iPhone 4S) and 1080p video recording. It is available March 16 in black and white, powered by A5X chip (with quad-core graphics) and supports 4G LTE networks. It's 9.4 millimeters thick and 1.4 pounds.


Wi-Fi only iPads cost $499 for 16 GB, $599 32 GB and $699 for 64 GB, while 4G versions cost $629 for 16 GB, $729 32 GB and $829 for 64 GB. Pre-orders start today, and the devices will be in stores March 16 in these 10 countries: U.S., UK, Japan, Canada, Switzerland, Germany, France, Hong Kong, Singapore and Australia.


Credit: Apple.com

Apple.com Touts New iPad Features

"Pick up the new iPad and suddenly, it’s clear. You’re actually touching your photos, reading a book, playing the piano. Nothing comes between you and what you love. To make that hands-on experience even better, we made the fundamental elements of iPad better — the display, the camera, the wireless connection. All of which makes the new, third-generation iPad capable of so much more than you ever imagined."

Credit: Apple.com