Shares of Apple, Inc. go ex-dividend as it gears up to distribute $3 billion to holders

Posted:
in AAPL Investors edited January 2014
Next Thursday, Apple will pay "shareholders of record" its quarterly dividend of $3.05 per share, but new investors needed to buy the company's stock by the market's close yesterday to qualify.

Apple


Apple automatically pays shareholders of record a dividend about a month and a half after the end of each fiscal quarter. At the previous day's stock price of $465.25, the dividend yield is 2.62 percent.

The next dividend payout date falls on Thursday August 15th for the summer quarter, but the last opportunity for shareholders to qualify for the dividend ended yesterday; shares changing hands two or fewer business days before the dividend record date do not transfer dividend rights.

The reason for the delay, as noted by Philip Elmer-Dewitt last quarter, is an accounting principle know as the "ex-dividend" or reinvestment date, which determines the party owed the dividend when shares change ownership immediately before the dividend is paid. When a share is sold, the transaction does not "settle" for three days.

The stock market (in Apple's case, NASDAQ) automatically adjusts the value of the company's stock by the value of the dividend, as the dividend reduces the value of the company because it is paid from the company's cash holdings.

This is offset by the fact that shareholders are getting the dividend, and can expect an ongoing dividend in the future in addition to the ongoing appreciation of the stock, further enhanced by the buyback program, which increases the scarcity (and therefore value) of Apple's stock by taking it off the market.

Over the past year, Apple has been paying out around $2.5 billion in dividends every quarter, a figure that increased 15 percent to $2.8 billion last quarter when Apple increased the payment to the holders of its 908.4 million outstanding shares.

$109 million less in dividend payments after buying back shares

Beginning last quarter, the company started paying its recently announced "significant increase" in dividends as part of an expanded capital return program.

Apple raised its quarterly dividend from $2.65 per share to $3.05 and added another $50 billion to its stock buyback program.

Apple's stock buyback spent $16 billion over the last quarter buying 36 million shares off the market at an average price of $444.44. Apple still has $44 billion left to invest in itself under the current program over the next two and a half years.


Source: Ycharts.com


Stock buybacks "retire" outstanding shares, leaving Apple with $109 million less in dividend entitlements to pay out just from the 36 million shares it acquired and effectively destroyed last quarter.

The buyback also necessarily raises the company's Earnings Per Share but causes its calculated market capitalization to decrease, although the fundamentals then support a higher stock price given the reduction in overall share count.

Apple's stock buyback was essentially a massive acquisition of itself, larger than than even Google's $12.5 billion purchase of Motorola Mobility. With Apple's stock price now at about $460, the shares it bought last quarter would now cost an additional $576 million if the company had waited.

That explains why the company has blown through its buyback fund over three times faster than the $5.272 billion per quarter average payment it would have made if it had scheduled the buybacks to occur evenly across the scheduled period.
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Comments

  • Reply 1 of 21
    just_mejust_me Posts: 590member


    Story is a day late.

  • Reply 2 of 21

    Quote:

    Originally Posted by AppleInsider View Post



    The ...although the fundamentals [after a buyback] then support a higher stock price given the reduction in overall share count.


    image


     


    Huh? If it were so simple, there's an obvious way to make your share price infinite.

  • Reply 3 of 21
    dasanman69dasanman69 Posts: 13,001member
    just_me wrote: »
    Story is a day late.

    I believe on purpose to avoid a cash grab and a artificial increase on the stock price.
  • Reply 4 of 21
    dickprinterdickprinter Posts: 1,060member


    Off topic but I've noticed over the past week that AI appears in the Google financial news feed: http://www.google.com/finance?client=ob&q=NASDAQ:AAPL


     


    They are now in the company of a few anti-Apple click-bait sites such as ValueWalk and Minyanville. Hopefully the presence of AI will help change the trend of tech and financial bloggers' anti-Apple crusade.

  • Reply 5 of 21
    jungmarkjungmark Posts: 6,800member
    :???:

    Huh? If it were so simple, there's an obvious way to make your share price infinite.

    I suppose you can have 1 share for $1000000000.
  • Reply 6 of 21
    jungmark wrote: »
    :???:

    Huh? If it were so simple, there's an obvious way to make your share price infinite.

    I suppose you can have 1 share for $1000000000.

    That's what I am saying. It's not the 'fundamentals' (by which, people typically mean a company's cash flows, growth prospects, risk, or more generally, things that affect enterprise value) that are driving it, but the EPS arithmetic. The denominator in calculating EPS is different than before, that's all.

    Nothing necessarily changes in the value of the underlying business.

    If this analyst means something else, then his use of the word 'fundamentals' is not consistent with common usage.
  • Reply 7 of 21
    Apple stock continues to appear somewhat weak despite the buyback.
  • Reply 8 of 21
    MacProMacPro Posts: 19,251member
    Apple stock continues to appear somewhat weak despite the buyback.

    Your dry humor and excellent sarcasm continue to be an endless source of entertainment. Good job :)
  • Reply 9 of 21
    paul94544paul94544 Posts: 1,027member
    of course some will say that the stock price dropped (after ex dividend) and Apple is therefore doomed, not aware that many investors sell right after dividend is posted.
  • Reply 10 of 21
    I wouldn't say the stock is doomed, but it's high growth days are over, this dividend is proof of that.
  • Reply 11 of 21
    dunksdunks Posts: 1,254member

    Quote:

    Originally Posted by Potsie Webber View Post



    I wouldn't say the stock is doomed, but it's high growth days are over, this dividend is proof of that.


     


    What I would have given to have not been a cashed strapped student in the early 2000s! 

  • Reply 12 of 21


    thats the economic theory of supply and demand in action, if there are zero shares available, you would not be able to buy one, no matter the price, hence price tends to infinity as you suggest, so glad you understand :-)

  • Reply 13 of 21
    jragostajragosta Posts: 10,473member
    I wouldn't say the stock is doomed, but it's high growth days are over, this dividend is proof of that.

    How is a dividend proof that their growth must slow?

    Amazing how people with no concept of business matters are so eager to prove their ignorance. :no:
  • Reply 14 of 21
    I appreciate the price drop, as I will be able to buy even more AAPL shares with my dividend.
  • Reply 15 of 21
    test
  • Reply 16 of 21
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  • Reply 17 of 21
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  • Reply 18 of 21
    I appreciate the recent price drop, as I will be able to buy even more AAPL shares with my dividend.
  • Reply 19 of 21
    I appreciate the recent price drop, as I will be able to buy even more AAPL shares with my dividend.
  • Reply 20 of 21
    I appreciate the recent price drop, as I will be able to buy even more AAPL shares with my dividend.
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