Apple to Initiate Dividend

Last week, I took a look at Apple’s ($AAPL) valuation. I noted the company has a gigantic cash horde but I said that I doubted a dividend would be coming soon.

Shows what I know! Apple announced today that it will start paying a dividend of $2.65 each quarter. That works out to $10.60 per year. Based on Friday’s closing price of $585.57, that works out to a yield of 1.81%. Apple also said it will buy back up to $10 billion of its own stock.

I’m impressed when a company gives its profits to its shareholders who, after all, are the owners of the company. When companies get too much money, problems can happen. Investment manager Peter Lynch referred to this as the Bladder Theory of corporate finance. For some reason, too many CEOs see the need to merge and acquire. Too much cash is a certain catalyst for a bad acquisition idea. You can never go wrong with giving the cash to the owners.

If you had bought shares of Apple three years ago, you’d now be yielding 10.4% from your purchase price. If you had bought Apple nine years ago today, the dividend yields would be 141.9%.

Apple’s annual dividend works out to roughly 1.09 points on the S&P 500. To put that in context, last year the index paid out 26.425 in dividends.

On Thursday, by the way, Apple got as high as $600.01 per share. Last week, I had said that the fair price was $600.36.

Posted by on March 19th, 2012 at 9:52 am


The information in this blog post represents my own opinions and does not contain a recommendation for any particular security or investment. I or my affiliates may hold positions or other interests in securities mentioned in the Blog, please see my Disclaimer page for my full disclaimer.

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