Apple Inc. has been one of the greatest growth stories of the past 50 years. Since the introduction of the iPod music player in October of 2001, Apple has roared back from the brink of oblivion to become the world’s largest public company with a total stock market value of $550 billion.
Investors have been richly compensated for their devotion, as the company’s stock has gained an eye-popping 5,700 percent over the past decade. However, this startling success has presented the company with a dilemma that all pure growth firms eventually confront: When to start paying dividends.
For Apple, the answer is now. Beginning July 1, the firm will distribute a quarterly dividend of $2.65 per share, or about $10 billion per year. That translates into a 1.8 percent yield based on today’s stock price. Furthermore, the company announced plans to buy back up to $10 billion worth of stock over the next three years in an additional measure to shovel cash out to shareholders.
Of course, Apple’s
dilemma is born of a most enviable circumstance: It has amassed too much dough. The fortuitous confluence of high margins and red-hot demand has larded Apple’s coffers with $98 billion in cold hard cash. To put that figure in perspective, it exceeds the market value of 473 of the 500 companies in the S&P index. That cash ultimately belongs to shareholders, who have been clamoring to get their hands on some of it.