AAPL Investors Hold Hands Out for Long-Awaited Dividend
Thursday is the day Apple begins rewarding its investors with cash dividends at the rate of $2.65 per share. Though shareholders will likely appreciate the kickback, the dividend likely won't immediately propel the company's recently wilting stock back into the stratosphere. As they continue into the future, the payments could eat away at the sizable cash stash Apple accumulated under the leadership of Steve Jobs.
08/15/12 5:00 AM PT
Apple shareholders will be paid a dividend on Thursday as part of the company's $10 billion share buyback program announced in March. Starting on Aug. 16, shareholders of record will receive US$2.65 per share each quarter.
When it announced the dividend, Apple was coming off a quarter that blew away Wall Street expectations. But the company's latest earnings were lower than expected, which Apple partially attributed to delayed sales from consumer anticipation about upcoming products. Though the quarterly report wasn't catastrophic -- Apple's earnings were modest rather than record-breaking -- the company's stock still tumbled following the announcement.
Apple's relatively small dividend payment isn't likely to help its stock price soar back to its record-setting heights, said Dave Denis, professor of business administration at the University of Pittsburgh graduate school of business.
"The fact that they had a disappointing quarter doesn't change things much because the dividend is still relatively small as compared with the company's current cash balance."
The dividend still has significance, however, said Denis. Under the leadership of Steve Jobs, Apple typically hung onto a large cash stash and kept investor demands at arm's length. This dividend and plans for future ones, however, could be an indication that those policies will shift under current CEO Tim Cook's tenure. The company is sitting on an estimated $100 billion cash pile, but even a small dividend can poke away at that, said Denis.
"The dividend is still a big deal, though, in that the company is implicitly committing to continue the payment of this dividend in the future," he said. "That will gradually reduce the company's cash balance over time if operating profits continue to be disappointing."
Apple's iPad accounted for nearly 70 percent of the tablet market in the second quarter of the year, shipping 17 million iPad tablet, according to a report from IHS iSuppli.
The company's shipments jumped 44.1 percent from the 11.8 million units it pushed out in the first quarter.
The company's chief rival -- and the one with which it is embroiled in a bitter patent trial in California now -- grabbed the number two spot with 9.2 percent of the market. Amazon, with its Kindle Fire, took 4.2 percent of the market for the third spot. Asus and Barnes & Noble rounded out the fourth and fifth spots for marketshare.
It's the first time since the first quarter of 2011 that the company has been in control of such a large chunk of the market.
Rumors about the next iPhone are picking up traction, but there are also clouds of speculation swirling around the next generation of Mac computers. Apple Insider uncovered configuration files on the new Mountain Lion OS that suggest unreleased versions of the iMac and Mac Pro might ditch discs and launch without optical drives.
Optical drives would presumably still be available as peripheral devices.
If any company is going to facilitate that transition away from physical media, it might as well be Apple, said Ben Bajarin, director and founder of Creative Strategies. Given the company's ecosystem that integrates software and digital content downloads through iTunes and the Mac App Store, its customers are already accustomed to the disc-free digital process, he said.
"The app economy has helped condition consumers to be used to the App Store buying process and getting their software digitally rather than from a disc," he told MacNewsWorld. "Apple developers have been embracing this and much, if not all, of the latest software is available for download either from the developer's site or from the Mac App Store."
The move -- which Bajarin said is inevitable, even if it doesn't come with the newest upgrade -- could mean the dawn of a new and improved era for PC software.
"This move to digital is better for consumers and for developers and may very well help lead to some of the most exciting Mac hardware we have ever seen," he said. "If you think about this as an analogy related to the iPhone or iPad, that software crazy would have never happened if we needed to go to the store and buy a disc, then install it via our PC to our smartphone. The elimination of the disc led to a software explosion. I see the same kind of software opportunity shaping up for Mac software as well."
Apple did not respond to our request for comment.