Apple shares approach ex-dividend as it gears up to distribute $3 billion to shareholders

Posted:
in AAPL Investors edited November 2015
On November 12, Apple will pay shareholders of record a quarterly dividend of $0.52 per share, but investors must have settled ownership of the company's stock by Thursday November 5 in order to qualify.

cash


Apple has been paying its shareholders a dividend about a month and a half after the end of each fiscal quarter ever since it declared its modern dividend plan in the summer of 2012.

The November dividend will be the sixth to occur since the company issued a 7-for-1 stock split. That split also converted the dividend from $3.29 per share to 47 cents per share.

It will be the third 52 cent dividend Apple has paid since it announced plans to increase its dividend from 47 cents during its Q2 earnings conference call.

Since the stock split, Apple repurchased a surprising $17 billion of its own stock in the year-ago September quarter; $5 billion of stock in open market purchases during its December quarter (Apple's Fiscal Q1 2015); another $7 billion of stock in open market purchases during its March quarter (Apple's Fiscal Q2 2015); another $4 billion of stock in open market purchases and $6 billion in Accelerated Share Repurchase in the June quarter (Apple's Fiscal Q3 2015); followed by an astounding $14 billion of stock in open market purchases in the most recent September quarter (Apple's Fiscal Q4 2015).

The company now has 5.575 billion shares outstanding.

Apple shares outstanding Q4 2015
Apple shares outstanding Q4 2015. Source: YCharts.com


Since the beginning of 2014, Apple shares are up 52.47 percent, compared to Microsoft's 45.88 percent gain or Google's 30.33 percent gain in nonvoting GOOG C class shares and 34.92 percent gain in standard GOOGL A class shares.

Since the start of 2015, Apple shares are up 10.53 percent, compared to Microsoft's 27.98 percent gain or Google's 38.32 percent gain in nonvoting GOOG C class shares and 42.32 percent gain in standard GOOGL A class shares. Google split its shares into the two classes and awarded investors one of each, effectively stripping investors of half their voting rights through the "dividend" dilution.

Apple MSFT GOOG Q4 2015

AAPL Dividends & Buybacks

Dividends are a minority portion of Apple's shareholder capital return program, the majority of which has been earmarked for buying back outstanding shares.

Capital Return AAPL Q4 2015


Buybacks increase the scarcity, and therefore value, of Apple's stock by taking shares off the market and retiring them. Removing shares from circulation also enhances the company's closely-watched earnings per share metrics. Over the last four quarters, Apple has repurchased $36 billion worth of its stock off the market or via accelerated repurchase programs.

"The Company also plans to increase its dividend on an annual basis, subject to declaration by the Board of Directors," Apple has stated in its 10K filing.

Over the past four quarters, Apple has paid out $11.6 billion in dividends to its shareholders, distributing about $3 billion every quarter, although that number has decreased slightly in tandem with the company's stock buybacks.

In total, Apple has spent $104 billion on stock buybacks since initiating its capital return program, including an opportunistic $14 billion share grab initiated after the stock plunged more than 8 percent last January following the company's holiday Q1 release which detailed its highest ever quarterly revenues and operating profits--results that the tech media depicted as "disappointing."

This happened again this summer after Apple announced record earnings in June but market players raised the fearsome prospect of weak sales in China. Apple's shares again tanked, enabling the company to opportunistically snatch up $14 billion of its own shares at the lowest point of 2015.

Apple has since announced blockbuster earnings for Q4, particularly in China where revenue nearly doubled and iPhone sales grew by 87 percent in a market that only grew by 4 percent (meaning that outside of Apple, the market for smartphones actually contracted). Apple also guided for growth higher than analysts were expecting. That correction in intelligence has since sent Apple's stock up a relatively meager 5.83 percent over the past week, although analysts are targeting a valuation near $148.

Combined with dividend payments and net share settlements, Apple has spent $143.5 billion on capital return since mid 2012, and it plans to return a total of $200 billion over the next year and a half.

Despite massive buybacks, Apple still has a growing pile of cash

Apple is currently using much of its domestic U.S. cash flow to finance stock buybacks and dividend payments, and is also issuing bonds at extremely low interest rates to help pay for its capital return programs.

It currently holds $186.9 billion of its total $205.666 billion cash reserves overseas; spending those funds domestically would incur a substantial tax penalty unless the U.S. Congress approves a tax break to enable and incentivize American firms to invest their foreign earnings in America.

In October 2013, after four months of investigation of Apple's foreign earnings and taxes, the U.S. Securities and Exchange Commission ended its inquiry without plans to take any further action after finding no evidence of wrongdoing by the company.

Investors generally view cash as bad for companies to hoard (due to low returns from conservative investments), but Apple can't currently distribute more cash to shareholders without incurring a substantial U.S. tax penalty.

That has made Apple's vast cash holdings a convenient problem to have, because it enables the company to borrow at interest rates very close to zero for domestic investment and capital returns to shareholders while still maintaining vast market power to make long term component deals and strategic investments ranging from acquisitions to expansions of its retail network and its production capabilities.

Apple expects to invest $15 billion in infrastructure, tooling, retail and other capital expenditures in fiscal 2016.
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Comments

  • Reply 1 of 35
    radarthekatradarthekat Posts: 2,973moderator
    Looking forward to my $4420 share of those dividends.
  • Reply 2 of 35

    I've said this before in other post comments, but I wouldn't mind a higher dividend.  I know Apple has prioritized buybacks to dividends.  But if they kept their cash pile the same (at 200+billion) and just directed future profits into dividends (~$10/share), it would be a substantial increase over current dividend ($2/share).  At current prices, this would be ~8% dividend yield, which I think lots of people would buy and hold, thereby raising the price (and lowering the dividend yield).  A dividend at this level would provide a floor to the share price and as profits rose, dividend could rise, but still keep enough cash around for Apple to do appropriate investments and acquisitions, etc. . . 

     

    It may not be in the cards, but it seems like a reasonable way for current long-term shareholders to benefit from Apple's success and amazing profits without having to hope for the market to value Apple "correctly".  I'd be interested in others take on a dividend vs buybacks.

  • Reply 3 of 35
    Looking forward to my $4420 share of those dividends.

    Congrats on your $1+ million in holdings.
  • Reply 4 of 35
    mcarlingmcarling Posts: 1,106member
    Quote:

    Originally Posted by aspenboy View Post

     

    I've said this before in other post comments, but I wouldn't mind a higher dividend.  I know Apple has prioritized buybacks to dividends.  But if they kept their cash pile the same (at 200+billion) and just directed future profits into dividends (~$10/share), it would be a substantial increase over current dividend ($2/share).  At current prices, this would be ~8% dividend yield, which I think lots of people would buy and hold, thereby raising the price (and lowering the dividend yield).  A dividend at this level would provide a floor to the share price and as profits rose, dividend could rise, but still keep enough cash around for Apple to do appropriate investments and acquisitions, etc. . . 

     

    It may not be in the cards, but it seems like a reasonable way for current long-term shareholders to benefit from Apple's success and amazing profits without having to hope for the market to value Apple "correctly".  I'd be interested in others take on a dividend vs buybacks.


     

    The effects of dividends and buybacks on the stock price are virtually indistinguishable from each other.  The idea that shifting cash from one to the other is going to make the stock more or less attractive to investors is to assume that investors are superstitious.  Probably a few are, but not enough to materially impact the stock price.

  • Reply 5 of 35
    slurpyslurpy Posts: 5,107member
    Quote:

    Originally Posted by RadarTheKat View Post



    Looking forward to my $4420 share of those dividends.

     

    Holy shit. 

  • Reply 6 of 35
    eriamjheriamjh Posts: 1,107member
    Apple needs to increase this dividend to $2/share. They can afford it.
  • Reply 7 of 35
    Edit: self-removed for being off-topic.
  • Reply 8 of 35
    radarthekatradarthekat Posts: 2,973moderator
    Congrats on your $1+ million in holdings.

    Yup, 8500 shares. Anything above $117.65 has my Apple shares above $1 million in value. Plus I'm holding about $160k in debit call spreads (with Max value of $252k), and short about $70k in Puts (now worth only 36k, so up about 50% on those positions). Looking forward to Apple breaching back above $130 in the months to come.

    700
  • Reply 9 of 35
    radarthekatradarthekat Posts: 2,973moderator
    aspenboy wrote: »
    I've said this before in other post comments, but I wouldn't mind a higher dividend.  I know Apple has prioritized buybacks to dividends.  But if they kept their cash pile the same (at 200+billion) and just directed future profits into dividends (~$10/share), it would be a substantial increase over current dividend ($2/share).  At current prices, this would be ~8% dividend yield, which I think lots of people would buy and hold, thereby raising the price (and lowering the dividend yield).  A dividend at this level would provide a floor to the share price and as profits rose, dividend could rise, but still keep enough cash around for Apple to do appropriate investments and acquisitions, etc. . . 

    It may not be in the cards, but it seems like a reasonable way for current long-term shareholders to benefit from Apple's success and amazing profits without having to hope for the market to value Apple "correctly".  I'd be interested in others take on a dividend vs buybacks.

    I'm not so concerned whether excess cash is used for dividend versus buybacks. Dividends are taxable as ordinary income, so I prefer long-term capital gains, which I can control when I take. If you are looking for more income from your holdings, learn to trade options against them, as I do. You can earn quite a bit on top of the dividend you receive. Maybe not another 6% to get to the 8% you are suggesting Apple should pay out as a dividend, but it's not out of the cards to do so.
  • Reply 10 of 35
    MacProMacPro Posts: 18,012member
    Looking forward to my $4420 share of those dividends.

    We have all ours automatically buy more AAPL, have since the dividends started. It an amazing form of compound interest! :) We are in the same ball park as you too. I did sell a few thousand dollars worth last year and buy Netflix and that's doing very well too. Other than that I leave well alone but I keep thinking about Fred's advice to spread more like that.
  • Reply 11 of 35
    <h2>Despite massive buybacks, Apple still has a growing pile of cash</h2>

    This is (at least partially) wrong: if you subtracts debts (bond issued to perform buybacks), "net cash and investments" is basically stable (142B$ in dec-2013, 142B$ in dec-2014 and 141B$ in sep-2015). In my opinion this would be a good reason to stop massive buy-backs, because clearly against interests of investors.
  • Reply 12 of 35
    Apple should stop giving away money and start seriously investing in the future. Apple should especially Tim Cook should stop trying to appease wall street. Wall street has never particularly played nice with Apple so Apple shouldn't waste there time trying to appease wall street.

    Steve Jobs never would have gone to the lengths that Mr. Cook has gone too when it comes to appeasing wall street types.

    Apple needs to focus on what they do best making great products and services with great connectivity. But more then that they really need to look at investing into the future and their own future.
  • Reply 13 of 35
    pr93pr93 Posts: 2member
    Yes,I agree with the others. Apple announces record earnings/profit and they reward shareholders with an insulting 5 cent increase to our dividend. Most other high growth stocks such as Amazon,Facebook,Skyworks have rewarded their shareholders handsomely with either major increases to the dividend payout or noteworthy escalations to their stock price. Apple has done neither this year. Come on Apple, get on the ball and reward your long term shareholders with more than just lip service about how well your doing.
  • Reply 14 of 35
    pr93 wrote: »
    Yes,I agree with the others. Apple announces record earnings/profit and they reward shareholders with an insulting 5 cent increase to our dividend. Most other high growth stocks such as Amazon,Facebook,Skyworks have rewarded their shareholders handsomely with either major increases to the dividend payout or noteworthy escalations to their stock price. Apple has done neither this year. Come on Apple, get on the ball and reward your long term shareholders with more than just lip service about how well your doing.

    There is no direct correlation between a high dividend and stock price. Some people advise to beware a stock which offers an unusually high dividend as the company may be dangerously close to insolvency.

    Personally, I'd prefer both the dividend and the buybacks were ended and the money be used to leapfrog their competitors instead.
  • Reply 15 of 35
    stompystompy Posts: 325member
    Quote:
    Originally Posted by AppleInsider View Post



    On November 12, Apple will pay shareholders of record a quarterly dividend of $0.52 per share, but investors must have settled ownership of the company's stock by Thursday November 5 in order to qualify.

    This is incorrect. The date of record (or the date by which ownership must have been settled to receive dividends) is Monday, November 9.

     

    Since trades take three days to settle, you must have owned Apple stock by Wednesday, November 4 if you expect to receive dividends.

     

    November 5 is simply the ex-dividend date (or the date the stock trades without the dividend calculated into the share price).

     

    (edit - can't believe I need a calendar to tell what day yesterday was :embarrass )

  • Reply 16 of 35
    Quote:

    Originally Posted by pr93 View Post



    Yes,I agree with the others. Apple announces record earnings/profit and they reward shareholders with an insulting 5 cent increase to our dividend. Most other high growth stocks such as Amazon,Facebook,Skyworks have rewarded their shareholders handsomely with either major increases to the dividend payout or noteworthy escalations to their stock price. Apple has done neither this year. Come on Apple, get on the ball and reward your long term shareholders with more than just lip service about how well your doing.

    So just how does Apple create a noteworthy escalation to its stock price? Exceed analyst expectations? Announce record profits? Have almost 100% annual growth in a major market? Remove billions of $ in stock from the market through buybacks? Borrow money to enable dividend payouts?

     

     Wall Street responds with "sell and short AAPL!" Amazon alternates between a slight profit and big losses yet the stock goes up.

  • Reply 17 of 35

    yes linkman your correct,but it doesn't make it any less frustrating!

     

    Long aapl!

  • Reply 18 of 35
    Looking forward to my $4420 share of those dividends.

    I turned 79k (back in 2007) to the same amount as you and FINALLY cashed out out half yesterday
  • Reply 19 of 35
    davidwdavidw Posts: 945member
    I'm not so concerned whether excess cash is used for dividend versus buybacks. Dividends are taxable as ordinary income, so I prefer long-term capital gains, which I can control when I take. If you are looking for more income from your holdings, learn to trade options against them, as I do. You can earn quite a bit on top of the dividend you receive. Maybe not another 6% to get to the 8% you are suggesting Apple should pay out as a dividend, but it's not out of the cards to do so.

    Dividend on long term stocks is qualify dividend and is taxed at your long term capital gain rate. Dividend on stocks held for less than a year is taxed as ordinary income. Dividend is also taxed the year you received it, regardless if you chose to reinvested your dividend into buying more shares of the stock.
  • Reply 20 of 35
    radarthekatradarthekat Posts: 2,973moderator
    How I reinvested my AAPL dividend:


     


    15 April $110/115 AAPL call spread contracts at $3.35 with a max value of $5.00. 50% potential gain if AAPL is >=$115 at expiration.


     


    You wont get 50% in six months from reinvesting in the shares.


     


    BTO 15 AAPL Apr 15 2016 110 Calls Filled at $14.774


    STO 15 AAPL Apr 15 2016 115 Calls Filled at $11.424

     

    I think it's a layup to put on these call spreads where the max value comes at the last price the company supported via the buyback. Apple bought back 122 million shares last quarter at an average price of $114.75, close enough to the $115 these spreads need to hit max value.

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