- Associated Press - Monday, March 19, 2012

NEW YORK (AP) - Apple is finally acknowledging that it has more money than it needs. But don’t expect it to cut prices on iPhones and iPads. Instead, the company said on Monday that it will reward its shareholders with a dividend and a stock buyback program.

Apple, the world’s most valuable publicly traded company, sits on $97.6 billion in cash and securities.

The company has stockpiled the cash through a combination of great ideas and prudence. Apple spends money, to be sure, building data centers, buying parts for its products and pursuing ambitious projects such as a new 2.8-million-square-foot headquarters that has been likened to a spaceship. It also invests in the research and development of new technology and negotiates an occasional acquisition.

But Apple simply hasn’t managed to spend its earnings faster than people are lining up to buy its iPads, iPhones and other gadgets.


The decision to return some of that money to investors is a clear signal that Apple is taking a different approach in the post-Jobs era.

Former CEO Steve Jobs resisted calls to issue dividends for years. He argued that the money was better used to give Apple maneuvering room to acquire other companies, for instance. Apple did pay a quarterly dividend between 1987 and 1995, but Jobs was not involved with the company at the time.

Jobs died in October after a long fight with cancer.

Since then, pressure had been mounting on new CEO Tim Cook. Apple’s ever-growing pile of cash was earning a paltry amount of interest and the fact that it was sitting there unused could have left the company open to charges of mismanagement and possible shareholder lawsuits.

On Monday, Cook said that, with as much cash as Apple has on hand, a dividend won’t restrain the company’s options.

“These decisions will not close any doors for us,” he told analysts and reporters on a conference call.

Indeed, Apple can afford it. The dividend, which should placate shareholders, will cost about $10 billion the first year. Apple generated $31 billion in cash in the fiscal year that ended in September and analysts expect it to add another $70 billion to $85 billion this year.

Apple said it will pay a quarterly dividend of $2.65 per share, starting in its fiscal fourth quarter, which begins July 1.

The dividend works out to $10.60 annually, or 1.8 percent of the current stock price. Although Microsoft Corp., pays 2.5 percent of its stock price in dividends, and Hewlett-Packard Co. pays 2 percent, analyst Tavis McCourt at Morgan Keegan said Apple’s dividend is relatively generous for a large technology company.

Energy and phone companies often pay dividends worth more than 5 percent of their stock price.

In absolute terms, Apple will pay one of the richest dividends in the U.S. The roughly $10 billion it will spend in its first year, places it just below companies including AT&T Inc. and Verizon Communications Inc., which are among the biggest spenders because they use dividends as their main way to attract investors.

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