Notes of interest from Apple's dividend & stock buyback conference call

Posted:
in AAPL Investors edited January 2014


Following Apple's announcement on Monday that it will pay a quarterly dividend of $2.65 per share as well as initiate a $10 billion share buyback program, executives from the company participated in a conference call with analysts and investors.



Apple Chief Executive Tim Cook noted that even though the company sold 37 million iPhones last quarter, it represented less than 9 percent of all handset sales. "The potential for iPhones is enormous."



On the launch of the new iPad: "It just keeps getting better." 55 million iPads sold to date, but no sales figures on the new iPad given.



Apple still has less than 6 percent PC market share as the Mac continues to grow.



"We are innovating an incredible pace."



Apple is also investing in distribution around the world. "We don't see ceilings to our opportunities," Cook said.



All of this has led to Apple amassing a "substantial amount of cash." This has led to increased research and development, acquisitions, new retail stores, building out of infrastructure and more. "You will see all of these in the future," Cook said.



"We are going to initiate a dividend and share repurchase program. We have thought very deeply and very carefully about our cash balance. We will continue to invest in the business."



Innovation remains the most important focus at Apple, and Cook said the new program won't make them lose sight of that.



The new program is expected to broaden Apple's investor base by attracting new investors that don't currently own Apple stock.



Cook said they plan to review the program periodically.



Chief Financial Officer Peter Oppenheimer said Apple has been "very disciplined" with its cash. In fiscal 2011, its cash increased by $31 billion, with $21 billion coming from abroad.



Apple wants to maintain the flexibility to take advantage of investment opportunities that present themselves.



None of Cook's unvested RSUs will participate in dividends, at the CEO's request.



"We remain very confident in the future of our business, are extremely enthusiastic about the opportunities that lie ahead, and look forward to executing our plans to initiate a dividend and share repurchase program," Oppenheimer said.



Dividend payouts are expected to be more than $2.5 billion per quarter, or more than $10 billion per year, which would make Apple one of the highest dividend payers in the U.S.



"We actually do love to announce new products, we just don't do it during conference calls," Cook said when questioned by one analyst about its future product line.



"I am extremely confident in our future. The pipeline is full of stuff. I think customers are going to be incredibly pleased with what they see coming out," Cook said.



Apple's dividend and share repurchase program will be done with cash held in the U.S. Bringing its overseas cash to the U.S. would cost Apple a great deal in taxes and Oppenheimer said the company has no plans to do so.



On stock splits: "This is something that we have looked at while we were looking at this cash question," Cook said. It's something they "continue to look at."



Sales of the new iPad: "We had a record weekend and we're thrilled with it," Cook said.



Tens of billions of dollars of Apple's cash remains 'stuck' overseas and repatriating that cash would result in major tax implications. Apple has expressed this concern to Congress, as it believes existing tax laws provide significant disincentives to corporations looking to bring cash back into the country.



Apple opted to go to the hybrid (dividend/stock-repurchase) approach after much "analysis and thinking" and listening to the feedback from their investors.



The primary objective of the stock repurchase program is to reduce dilution from the ongoing distribution of shares to its employees and executives as part of their future compensation.



As for Apple's domestic cash, Cook noted that "There are a wide range of potential investments" that he obviously won't talk about today.



There's 'no magic number' in terms of the amount Apple thinks it should retain as a cash balance.



The primary use of Apple's cash war chest, above all, remains in the development of products.



[ View article on AppleInsider ]

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Comments

  • anantksundaramanantksundaram Posts: 16,915member
    None of Cook's RSU's will get dividends, at his request.



    Interesting, and unusual. Nice move!



    Cook is putting his money where his confidence is, i.e., he wants to clearly try and signal that he expects Apple will continue to be a "growth" stock.
  • ladybumpsladybumps Posts: 25member
    Cook is putting his money where his confidence is, i.e., he wants to clearly try and signal that he expects Apple will continue to be a "growth" stock.[/QUOTE]



    If it's a "growth" stock what would be the incentive for an investor to enter into the buyback programme? Wouldn't you just hang on to good stock?
  • jbfromozjbfromoz Posts: 91member
    Quote:
    Originally Posted by AppleInsider View Post


    "We are going to initiate a dividend and share repurchase program. We have thought very deeply and very carefully about our cash balance. We will continue to invest in the business."



    is cash the only option for this dividend or is there a share dividend (not sure even how that would work for fractions of a share)
  • rogifanrogifan Posts: 10,669member
    Tim just said on the call that Apple had a record weekend. Wouldn't supply any iPad numbers of course but he wouldn't throw out the word "record" if sales were soft.
  • anantksundaramanantksundaram Posts: 16,915member
    Quote:
    Originally Posted by ladybumps View Post


    If it's a "growth" stock what would be the incentive for an investor to enter into the buyback programme? Wouldn't you just hang on to good stock?



    There are enough institutional holders with likely liquidity needs that will bite (almost 80% of AAPL is owned by institutions). They'll have plenty left over to participate in growth, I'll guess!
  • anantksundaramanantksundaram Posts: 16,915member
    Quote:
    Originally Posted by JBFromOZ View Post


    is cash the only option for this dividend or is there a share dividend (not sure even how that would work for fractions of a share)



    Yes, companies can issue share dividends as well. But that is just a 'mild' form of a stock split.
  • tundraboytundraboy Posts: 1,437member
    Quote:
    Originally Posted by anantksundaram View Post


    None of Cook's RSU's will get dividends, at his request.



    Interesting, and unusual. Nice move!



    Cook is putting his money where his confidence is, i.e., he wants to clearly try and signal that he expects Apple will continue to be a "growth" stock.



    Yes, that caught my eye. Very ethical, removing any taint of self-interest in the decision to issue dividends. And signaling that they are not losing sight of and faith in the long term future of the company.



    I just hope that this is it for the foreseeable future when it comes to Apple's cash planning. In the end, take care of the company and the stock takes care of itself. Anymore fiddling with dividends and buybacks and it starts to reek of stock manipulation and pandering to short-horizon investors.
  • macnewsjunkiemacnewsjunkie Posts: 189member
    Quote:
    Originally Posted by anantksundaram View Post


    None of Cook's RSU's will get dividends, at his request.



    Interesting, and unusual. Nice move!



    Cook is putting his money where his confidence is, i.e., he wants to clearly try and signal that he expects Apple will continue to be a "growth" stock.



    I agree that this shows that Cook is a class act. If more CEO's had his work ethic, personal ethics, and common sense, we would have a lot more stock growth in America.



    I originally missed that this was a quarterly dividend! Much better than I though originally. Will look forward to the growth in my IRA from this!



    The 9% number as a total of all handset sales is understating the growth potential since growth in overall handsets and overall internet devices is still not a small consideration. I like that he mentioned the growth potential in the PC market (only 6% out of the whole market). That sounds like they are planning on updating some of their older products like the Mac Pro's or the Mini's. I am reading something between the lines that he may not be intending. His comment may only foreshadow the major update for the macbook pros.



    Overall, it sounds like Apple is still running on all cylinders.
  • aaronjaaronj Posts: 1,582member
    OK, maybe I'm missing something here, or my fuzzy understanding of the numbers is wrong, or whatever.



    But am I the only one who thinks that this is, when all is said and done, a drop in the bucket? Note that I'm not saying that they should have done something else, or bigger, or anything like that. But as this has to do with their balance, it doesn't seem like this is going to effect it much.



    If I'm completely wrong, I'd be happy for someone to explain it to me.
  • applegreenapplegreen Posts: 421member
    Quote:
    Originally Posted by anantksundaram View Post


    None of Cook's RSU's will get dividends, at his request.



    Interesting, and unusual. Nice move!



    Cook is putting his money where his confidence is, i.e., he wants to clearly try and signal that he expects Apple will continue to be a "growth" stock.



    Tim Cook is a "class act." Best thing SJ did was to hire TC.
  • anantksundaramanantksundaram Posts: 16,915member
    Quote:
    Originally Posted by AaronJ View Post


    OK, maybe I'm missing something here, or my fuzzy understanding of the numbers is wrong, or whatever.



    But am I the only one who thinks that this is, when all is said and done, a drop in the bucket? Note that I'm not saying that they should have done something else, or bigger, or anything like that. But as this has to do with their balance, it doesn't seem like this is going to effect it much.



    If I'm completely wrong, I'd be happy for someone to explain it to me.



    It's better to start lower and get to a higher number over time.... in other words, better to go up over time from $2.65 per share to say, $5 per share, than to start with $5 and stay there (or commit to going up from that level).



    Both the buyback and dividends seem like "toe in the water" moves, currently.
  • aaronjaaronj Posts: 1,582member
    Quote:
    Originally Posted by anantksundaram View Post


    It's better to start lower and get to a higher number over time.... in other words, better to go up over time from $2.65 per share to say, $5 per share, than to start with $5 and stay there (or commit to going up from that level).



    Both the buyback and dividends seem like "toe in the water" moves, currently.



    Ok, thanks. Gotcha.
  • jameskatt2jameskatt2 Posts: 564member
    Quote:
    Originally Posted by anantksundaram View Post


    It's better to start lower and get to a higher number over time.... in other words, better to go up over time from $2.65 per share to say, $5 per share, than to start with $5 and stay there (or commit to going up from that level).



    Both the buyback and dividends seem like "toe in the water" moves, currently.



    The buyback and dividends are a substantial loss of money for Apple. Losing $45 BILLION over 3 years is NOT a "toe in the water" move.



    This leaves Apple only $65 BILLION left, with almost all of it being trapped outside the U.S.



    This gives Apple less flexibility in aggressively buying up components to keep its monopsony that crushes its competitors.



    Apple's Cash Hoard is a weapon. Steve Jobs would have kept this weapon. Steve noted that companies that give out dividends are at the end of their growth period - this includes companies like Microsoft, whose stock has been flat for the past decade.



    Weakening Apple makes me unhappy. What the buyback and dividends do is make it much more difficult for Apple to become a trillion dollar company.



    What the buyback and dividends do is to make Apple a much more fragile company, whose market cap depends on the psychological whims of pundits.





    I don't like this at all as an Apple shareholder.
  • anantksundaramanantksundaram Posts: 16,915member
    Quote:
    Originally Posted by jameskatt2 View Post


    The buyback and dividends are a substantial loss of money for Apple. Losing $45 BILLION over 3 years is NOT a "toe in the water" move.



    This leaves Apple only $65 BILLION left, with almost all of it being trapped outside the U.S.

    ........

    I don't like this at all as an Apple shareholder.





    Wrong. Apple will likely add at least $40B per year to its can pile each year, over the next three years. Their cash pile will continue to grow, despite this announced payout to shareholders.



    You should work on bettering your math so that you know what you're getting, as a shareholder.
  • red oakred oak Posts: 532member
    Apple is likely close to generating $5 billion A MONTH in cash. By end of 2012, their cash balance will likely increase to $150+ billion even with dividends payments starting in September



    By end of 2013, even with the dividend, the cash balance will grow to: $150 billion + $60 billion new cash flow - $10 billion dividend = $200 billion



    By end of 2014, $190 billion + $60 billion (to keep simple) - $10 billion = $240 billion



    I like the fact that Apple is armed with cash to the nines for this fight. It is going to be an extensive, bloody campaign to continue to build out its businesses on a massive scale. And who knows what twists and turns it may take



    This story will not go away. Apple will soon have $200 billion on its books. It will be the subject of a lot of press and attention. At a minimum, they will be able to significantly increase the dividend each year with little impact to the business or cash position



    I'm sure Apple wanted to do something bigger, but was limited to do the taxation issue of expatriation of 65% of their cash. Our tax system is really f***-up
  • simonmtlsimonmtl Posts: 40member
    Quote:
    Originally Posted by jameskatt2 View Post


    The buyback and dividends are a substantial loss of money for Apple. Losing $45 BILLION over 3 years is NOT a "toe in the water" move.



    Yes, and it would be tragic if they stopped making money today and have to pay out all this money over the next 3 years.



    BUT, they do expect to keep selling more and more, so even with this level of expense, they will still keep accumulating a great deal in their war chest. It will keep growing, alas at a more respectable pace, and stock holders will reap more reward.



    Let's see how Wall Street digests this news. It takes effect in July BTW, so plenty of time for growth until then.
  • solipsismxsolipsismx Posts: 19,566member
    Quote:
    Originally Posted by jameskatt2 View Post


    The buyback and dividends are a substantial loss of money for Apple. Losing $45 BILLION over 3 years is NOT a "toe in the water" move.



    This leaves Apple only $65 BILLION left, with almost all of it being trapped outside the U.S.



    This gives Apple less flexibility in aggressively buying up components to keep its monopsony that crushes its competitors.



    I'm guessing most of its components are paid for with funds outside the US.
  • anantksundaramanantksundaram Posts: 16,915member
    Quote:
    Originally Posted by SolipsismX View Post


    I'm guessing most of its components are paid for with funds outside the US.



    That would be correct. Not only would there be tax advantages to doing so, but it also obviates the need for unnecessary expenses for currency hedging (by providing a natural hedge).
  • haarhaar Posts: 503member
    Quote:
    Originally Posted by AppleInsider View Post








    Apple's dividend and share repurchase program will be done with cash held in the U.S. Bringing its overseas cash to the U.S. would cost Apple a great deal in taxes and Oppenheimer said the company has no plans to do so.









    [ View article on AppleInsider ]



    good to know, that apple will not go into debt just to pay a dividend... or they will not bring money into the country just to pay a dividend... or they will only pay a dividend from profit generated from USA sales.
  • blastdoorblastdoor Posts: 1,220member
    I suspect that the corporate tax situation won't be resolved until sometime after this year's election.



    I hope that the resolution ends up being something better than just a massive giveaway to corporations. Maybe combine a one time "holiday" that cuts the tax in half for repatriated profits over the course of the next year with a longer term resolution that ends this weird situation where those overseas profits aren't taxed until repatriated (that is, tax them immediately, and at the full existing rate).
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