Apple Inc. gears up to distribute $3.1 billion in dividends to shareholders

Posted:
in AAPL Investors edited February 2017
On February 16, Apple will pay shareholders of record a quarterly dividend of $0.57 per share, but investors must own the company's stock before February 9 in order to qualify. Apple will pay out $3.1 billion in dividends on its outstanding shares for the quarter.

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 February dividend will be the eleventh 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, which Apple subsequently increased last year to 52 cents.

February's dividend will be the fourth 57 cent dividend Apple has paid since it announced plans to increase its dividend from 52 cents during its Q2 2016 earnings conference call.

Over the past four quarters, Apple has paid out around $12 billion in dividends to its shareholders, distributing close to $3 billion every quarter, although that number has decreased slightly in tandem with the company's stock buybacks.

AAPL 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.

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 $34 billion worth of its stock off the market or via accelerated repurchase programs, with $11 billion of that spent in the most recent quarter ending in December.


Capital Return AAPL Q1 2017


In total, Apple has spent $144 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 in January 2015 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 in the summer after Apple announced record earnings in June but market players raised the fearsome prospect of weak sales in China. Apple's shares tanked, enabling the company to opportunistically snatch up $14 billion of its own shares at what was then the lowest point in 2015.

Apple subsequently announced blockbuster earnings for the holiday 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 had actually contracted). Apple also guided for growth higher than analysts were expecting. That correction in intelligence sent Apple's stock up a relatively meager few percent, followed by a massive collapse resulting from new rumors of supplier cuts that were interpreted as representing a massive decline in iPhone demand.

However, those rumors did not materialize in Q1 results. Instead, Apple provided guidance for Q2 to indicate a much smaller decline year over year than the rumors had anticipated. Even so, Apple's shares have continued to fall to levels not seen since the summer of 2014, before iPhone 6--the most popular and massively successful computing device ever sold--appeared.

Against earlier predictions, iPhone 6s achieved similar sales in the winter quarter, while Apple's valuation returned to the days of iPhone 5/5s. Over the March quarter, Apple's global sales of iPhones, iPad and Macs were all lower than the year ago quarter, with the company attributed to a difficult economic climate and very unfavorable exchange rates across most of its international regions.

Combined with dividend payments and net share settlements, Apple has spent $250 billion on capital return since mid 2012.

AAPL Buyback History

Prior to its 2014 stock split, Apple spent about $50 billion buying back shares at prices ranging from around $50 to $90. Since the stock split, Apple has repurchased shares at prices from $100 to $130 per share, at times significantly higher than the current stock price--indicating that Apple expected its stock to recover and appreciate to much higher levels. Apple expected its stock to recover and appreciate to much higher levels

Apple's shares have indeed since spiraled upward, and are currently trading above $130.

The company's post-split buybacks included a surprising $17 billion of its own stock in the September 2014 quarter; $5 billion of stock in open market purchases during its December 2014 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 September quarter (Apple's Fiscal Q4 2015) and $11 billion in the most recent December quarter.

As of January 20, 2017, the company has 5.247 billion shares outstanding.


Apple shares outstanding Q1 2017. Source: YCharts.com

Despite massive buybacks, Apple still has a massive 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 $230 billion of its total $246 billion in 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.

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 currently holds $88 billion in total debt, including $10.5 billion in Commercial Paper outstanding.

Last year Apple reported that it expected to invest $15 billion in infrastructure, tooling, retail and other capital expenditures in fiscal 2016. For the current year, Apple expects to spend $16 billion.

Global spending on expansion

Last May, Apple announced a $1 billion investment in Chinese ride-hailing company Didi Chuxing, a move that resulted in rival Uber ending its efforts to compete in China. The company also continues to expand its retail presence in China, in tandem with plans to expand its research and development center in Shanghai.


WaveRock facilities in Hyderabad, India | Source: Tishman Speyer


Apple has also initiated efforts to expand into India, including a technology center in Hyderabad (above) and a Design and Development Accelerator in Bengaluru.

The company is also expanding two offices in Israel focused on advanced silicon chip design and memory technology, as well as its corporate office and R&D center in Cambridge, England, focused on Siri voice recognition and natural language parsing intelligence.
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Comments

  • Reply 1 of 21
    garywadegarywade Posts: 1unconfirmed, member
    Feb. 16, not Feb. 6.
    phone-ui-guy
  • Reply 2 of 21
    garywade said:
    Feb. 16, not Feb. 6.
    Exactly! Also, it is shareholders of record on the 13th and not the 9th. Not sure where they are getting their information. Here it is from Apple.

    Declared: Jan 31, 2017
    Record: Feb 13, 2017
    Payable: Feb 16, 2017
    Amount: $.57 
    Type: Regular Cash


    schlack
  • Reply 3 of 21
    sflocalsflocal Posts: 4,339member
    I'll wait until the whiners start complaining that Apple should issue more shares for "investors" (i.e. Day Traders) to buy.
  • Reply 4 of 21
    linkmanlinkman Posts: 862member
    On February 6, Apple will pay shareholders of record a quarterly dividend of $0.57 per share, but investors must own the company's stock before February 9 in order to qualify.
    I thought this looked a little fishy. Paying out dividends on the 6th but some can buy the stock on the 7th or 8th and received that payout a day or two before? I guess that Time Machine patent is really working well for Apple.
  • Reply 5 of 21
    quinneyquinney Posts: 2,521member
    garywade said:
    Feb. 16, not Feb. 6.
    Exactly! Also, it is shareholders of record on the 13th and not the 9th. Not sure where they are getting their information. Here it is from Apple.

    Declared: Jan 31, 2017
    Record: Feb 13, 2017
    Payable: Feb 16, 2017
    Amount: $.57 
    Type: Regular Cash


    If you don't buy AAPL before the 9th, you won't be a shareholder of record by the 13th, because settlement takes three business days.
    stompy
  • Reply 6 of 21
    Unless one is planning on buying millions of shares just to get the dividend, then sell the stock, I can't see the point of this. Just buy it when it dips next time and sit on it.
  • Reply 7 of 21
    sog35 said:
    Bravo! Appleinsider got the Ex-Div date right!  You need to own the shares by market close today to get the dividend.

    Apple has purchased about $144 billion in shares. Average purchase price is about $105. So Apple purchased shares at a 20% discount to today's stock price. So Apple has saved shareholders about $30 billion just from stock appreciation. 

    And when the shares reach $150, Apple would have saved shareholders over $70 billion.
    The average purchase price is even lower than that, about $95 per share. Apple bought back nearly a half billion of the shares (split adjusted) - more than 30% of the shares bought back to date - at an average price of $70 in 2013 and early 2014.
  • Reply 8 of 21
    quinney said:
    garywade said:
    Feb. 16, not Feb. 6.
    Exactly! Also, it is shareholders of record on the 13th and not the 9th. Not sure where they are getting their information. Here it is from Apple.

    Declared: Jan 31, 2017
    Record: Feb 13, 2017
    Payable: Feb 16, 2017
    Amount: $.57 
    Type: Regular Cash


    If you don't buy AAPL before the 9th, you won't be a shareholder of record by the 13th, because settlement takes three business days.

    They didn't say "buy" as you did. They said "own" by the 9th. I would take own to mean settlement is complete which coincides with you becoming the shareholder of record. I stand by my comment, the correct data you provided about settlement, and the factual data provided from Apple's site. The AI data? Not so much.

    On February 16, Apple will pay shareholders of record a quarterly dividend of $0.57 per share, but investors must own the company's stock before February 9 in order to qualify. Apple will pay out $3.1 billion in dividends on its outstanding shares for the quarter.
  • Reply 9 of 21
    So how many shares repurchased? 1.5 billion???? At this rate will buy back company in 14 years? Possible?
  • Reply 10 of 21
    MacProMacPro Posts: 17,835member
    You can all thank me, I caused AAPL to shoot up. :(  

    I sold some of our shares at 120 as I needed $200K for a quick project, just a temporary need.  I fully intended to buy them back in a few weeks too ... after all AAPL has been stuck <120 for a long time now so no worries eh? I could have easily waited a few more weeks DOH! .....  /slaps head really hard/ Throws crystal ball out of window.

    I guess I shouldn't moan they only cost $70 pre split each originally and we have a lot more still but it still really, really annoying.  

  • Reply 11 of 21
    stompystompy Posts: 319member
    quinney said:

    If you don't buy AAPL before the 9th, you won't be a shareholder of record by the 13th, because settlement takes three business days.

    They didn't say "buy" as you did. They said "own" by the 9th. I would take own to mean settlement is complete which coincides with you becoming the shareholder of record. I stand by my comment, the correct data you provided about settlement, and the factual data provided from Apple's site. The AI data? Not so much.

    On February 16, Apple will pay shareholders of record a quarterly dividend of $0.57 per share, but investors must own the company's stock before February 9 in order to qualify. 
    Historically, when AI writes this quarterly dividend story, it contains inaccuracies that readers correct. While the original version of this story had a typo for date payable, I really doubt they also intended to write Feb 12 as the date to "own."

    Why? First, they didn't "correct" that part, and also because AI has already made the mistake of writing "buy" in conjunction with the date of record. In the next quarterly story, AI fixed that mistake.  Quinney's comment matches AI's meaning.

    Since readers still interpret AI's explanation in different ways, they might try writing 2 or 3 dates along with their correct names -- ex-dividend date, date of record and date payable -- and forget tying to provide a layman's explanation. (However, this is an apple rumors board, not an investment newsletter, and audience counts for something.)
    edited February 2017
  • Reply 12 of 21
    MacPro said:
    You can all thank me, I caused AAPL to shoot up. :(  

    I sold some of our shares at 120 as I needed $200K for a quick project, just a temporary need.  I fully intended to buy them back in a few weeks too ... after all AAPL has been stuck <120 for a long time now so no worries eh? I could have easily waited a few more weeks DOH! .....  /slaps head really hard/ Throws crystal ball out of window.

    I guess I shouldn't moan they only cost $70 pre split each originally and we have a lot more still but it still really, really annoying.  

    You're thinking about it wrong (IMO). Your stocks are only worth what you paid for them. They are a "potential" loss or gain up until the point at which you actually decide to sell.
  • Reply 13 of 21
    quinneyquinney Posts: 2,521member
    quinney said:
    garywade said:
    Feb. 16, not Feb. 6.
    Exactly! Also, it is shareholders of record on the 13th and not the 9th. Not sure where they are getting their information. Here it is from Apple.

    Declared: Jan 31, 2017
    Record: Feb 13, 2017
    Payable: Feb 16, 2017
    Amount: $.57 
    Type: Regular Cash


    If you don't buy AAPL before the 9th, you won't be a shareholder of record by the 13th, because settlement takes three business days.

    They didn't say "buy" as you did. They said "own" by the 9th. I would take own to mean settlement is complete which coincides with you becoming the shareholder of record. I stand by my comment, the correct data you provided about settlement, and the factual data provided from Apple's site. The AI data? Not so much.

    On February 16, Apple will pay shareholders of record a quarterly dividend of $0.57 per share, but investors must own the company's stock before February 9 in order to qualify. Apple will pay out $3.1 billion in dividends on its outstanding shares for the quarter.
    I'm sorry to drag this out further, but I think taking "own" to mean "settled" is incorrect.  For example, for calculating capital gains holding periods and wash sale exclusion periods, a person is deemed to own shares on the transaction date, not the settlement date.  A person certainly can gain or lose money on shares during the settlement period if they close out their position.  It seems like a semantic dissonance to say they didn't "own" anything, yet they made or lost money buying or selling it.  I think AI came the closest they ever have to explaining it correctly.
    stompycharlesgres
  • Reply 14 of 21
    radarthekatradarthekat Posts: 2,898moderator
    $3.1 billion in dividend payouts imply 5,438,596,491 shares.

    But the article later correctly reports the share count as of Jan 20 as 5.247 billion shares outstanding, and that number, minus any additional shares Apple may have bought back between then and today's close (close of Feb 8th), is what Apple owes the dividend against.  So the absolute dollar payout this quarter will be more like $2.99 billion.

    For those still confused about the ex-dividend date and the definition of ownership of shares, the 9th is the ex-dividend date, and that means you must be the beneficial owner of shares prior to the 9th in order to receive the dividend of those shares.  You become the beneficial owner AS SOON AS your order to purchase shares is executed.  

    The reason the date of record falls three business days later is that there's a three-day settlement period during which funds are transferred from the buyer's account to the seller's account and the purchased stock is assigned into the purchaser's name (or into street name of his brokerage).  And it's that list of owners, after settlement, to which dividends are paid.  So if you buy the shares at 3:59pm ET on the 8th, or even in the aftermarket session at 7:59pm ET on the 8th, and even if you subsequently sell them at 7:00am ET in the pre-market session on the morning of the 9th, you will be the beneficial owner of record three business days later and will receive the dividend on those shares.  
    edited February 2017 stompycharlesgres
  • Reply 15 of 21
    radarthekatradarthekat Posts: 2,898moderator
    "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 $34 billion worth of its stock off the market or via accelerated repurchase programs, with $11 billion of that spent in the most recent quarter ending in December."

    And finally, buybacks, by reducing the cash and cash equivalents on the books, increase the percentage of an invested dollar that buys a piece of the operating business versus a piece of a mountain of relatively unproductive cash.  Currently Apple's net cash position sits at about $160 billion.  The company has a total market cap of $694 billion.  And that implies that a dollar invested in Apple sees only 77 cents invested in the operating business and 23 cents invested in unproductive cash, thus diluting the investor's potential returns.  Investors would prefer their entire dollar be invstested in the operating business.  

    With Apple, in recent years, this seemingly hasn't been such a big issue, as the market has valued its cash as having near zero value.  But it's this fact that also has weighed on the stock, and so it has negatively affected shareholders, just not in the strictly dilutive sense described above.  It's perversely arguable that an Apple without the cash hoard it has would receive a higher earnings multiple, because each dollar invested would be purely invested in the productive operating assets.   
    edited February 2017
  • Reply 16 of 21
    $3.1 billion in dividend payouts imply 5,438,596,491 shares.

    But the article later correctly reports the share count as of Jan 20 as 5.247 billion shares outstanding, and that number, minus any additional shares Apple may have bought back between then and today's close (close of Feb 8th), is what Apple owes the dividend against.  So the absolute dollar payout this quarter will be more like $2.99 billion.

    For those still confused about the ex-dividend date and the definition of ownership of shares, the 9th is the ex-dividend date, and that means you must be the beneficial owner of shares prior to the 9th in order to receive the dividend of those shares.  You become the beneficial owner AS SOON AS your order to purchase shares is executed.  

    The reason the date of record falls three business days later is that there's a three-day settlement period during which funds are transferred from the buyer's account to the seller's account and the purchased stock is assigned into the purchaser's name (or into street name of his brokerage).  And it's that list of owners, after settlement, to which dividends are paid.  So if you buy the shares at 3:59pm ET on the 8th, or even in the aftermarket session at 7:59pm ET on the 8th, and even if you subsequently sell them at 7:00am ET in the pre-market session on the morning of the 9th, you will be the beneficial owner of record three business days later and will receive the dividend on those shares.  
    Apple effectively pays dividends on more than the number of shares outstanding; it also pays dividend equivalents on unvested RSUs.

    A typical quarterly report will actually report two different numbers for the total payout, with the number being reported depending on the context in which they are referring to dividend payments. One number is more or less what you'd expect the way you're doing the math - the dividend per share multiplied by the number of shares reported outstanding on the previous quarterly report (sometimes plus or minus a small amount for vested or bought-back shares).

    The other number is reported in discussions of cash flow and represents a slightly higher total. In this past quarter, e.g., it was around $100 million more. That has to do with Apple accounting for dividend equivalents and such. So on a cash flow basis, dividend payouts probably will represent an expense of $3.1 billion (as rounded) this quarter.
    edited February 2017 radarthekat
  • Reply 17 of 21
    Unless one is planning on buying millions of shares just to get the dividend, then sell the stock, I can't see the point of this. Just buy it when it dips next time and sit on it.
    You mean you don't time your $130 purchases based on whether you'll get a 57c rebate?
    SpamSandwichfastasleep
  • Reply 18 of 21

    Templeton said:
    So how many shares repurchased? 1.5 billion???? At this rate will buy back company in 14 years? Possible?
    I don't know about your math, but I will point out that a company can never take itself private buy buying all of its own shares.  Someone (or some company or collection of people) has to buy the publicly traded shares.  And retiring shares doesn't make it any easier to take a company private.  A trillion dollar company with 5 billion shares or a trillion dollar company with 100 shares costs just as much to buy out.
    SpamSandwichradarthekat
  • Reply 19 of 21
    Was there a benefit to apple shifting tact to start paying dividends to shareholders? Obviously shareholders benefit but apple's stockprice was always on the up regardless. Can't help but see it as wasted money, money that could have bought back more shares and boosted the stockprice through availability alone and benefiting shareholders possibly to a greater extent. This isn't my forte by a long stretch so correct me if I'm wrong.
  • Reply 20 of 21
    adm1 said:
    Was there a benefit to apple shifting tact to start paying dividends to shareholders? Obviously shareholders benefit but apple's stockprice was always on the up regardless. Can't help but see it as wasted money, money that could have bought back more shares and boosted the stockprice through availability alone and benefiting shareholders possibly to a greater extent. This isn't my forte by a long stretch so correct me if I'm wrong.
    My own thoughts on equity investing would have fewer companies paying dividends or, at least, more companies waiting longer before they started paying dividends.

    That said, for many equity investors it makes a stock more attractive. Paying dividends opens a stock up to investment (or larger investment) from investors - e.g. various funds - that otherwise wouldn't be interested in the stock. And at some point a company has to consider what else it might do with large cash reserves. Could Apple use all of that money for something else, e.g. a large acquisition? Yes, but it's not likely to do that (and I myself would tend be against using it for a large acquisition, depending of course on what would be acquired and at what price). Apple got to the point that it had more cash (without all that much debt) than it thought it might need (e.g. for R&D and the kind of small acquisitions it makes) in the foreseeable future. So it decided to start returning a lot of cash to shareholders. It thinks it can do that and still have plenty of flexibility to fund the things it might want to fund in the future.
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