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Apple hits $600 per share after announcing dividend

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Associated Press and San Jose Mercury News
  • Apple CEO Tim Cook gestures during the introduction of the iPhone 4S at Apple headquarters in Cupertino, Calif., last year.

    Paul Sakuma / Associated Press file

    Apple CEO Tim Cook gestures during the introduction of the iPhone 4S at Apple headquarters in Cupertino, Calif., last year.

Apple's stock closed above $600 for the first time Monday, the day the company announced plans to reward shareholders with a dividend and a share buyback program.
The stock rallied in the final minutes of trading to close at $601.10, an increase of $15.53, or 2.7 percent.
Apple is the world's most valuable company, with a market capitalization of about $560 billion. It topped $500 billion for the first time in late February, a market-value peak where few companies have ventured.
The company has been successful with what it calls “post-PC” products — smartphones and tablet computers that perform tasks people used to do on personal computers. In the U.S. and other industrialized markets, there's evidence consumers have delayed replacing PCs, hurting manufacturers such as Dell Inc. and Hewlett-Packard Co.
Apple has a healthy cash balance because of its success with those products. It had $97.6 billion in cash and securities at the end of 2011.
In a conference call Monday, Apple Inc. CEO Tim Cook announced that the Cupertino, Calif., company would initiate a dividend and share repurchase program beginning later this year, using $45 billion of nearly $100 billion cash on hand.
Subject to the board's approval, Cook said the company plans to offer a quarterly dividend of $2.65 per share sometime in its fiscal fourth quarter, which begins July 1.
"We have used some of our cash to make great investments in our business through increased research and development, acquisitions, new retail store openings, strategic prepayments and capital expenditures in our supply chain, and building out our infrastructure. You'll see more of all of these in the future," Cook said during an unusual conference call with analysts. "Even with these investments, we can maintain a war chest for strategic opportunities and have plenty of cash to run our business. So we are going to initiate a dividend and share repurchase program."
Apple also said its board has authorized a $10 billion share repurchase program for its fiscal year 2013, which begins Sept. 30 of this year. Apple said it expected the move to take place over three years and said its main goal was "neutralizing the impact of dilution from future employee equity grants and employee stock purchase programs."
Apple has been increasingly under pressure by investors to give back some of the $100 billion in cash it had accumulated in the past few years thanks to red-hot iPhone and iPad sales. In January, Apple unveiled another stellar earnings report, its first of 2012, with a breathtaking 118 percent jump in profit.
Yet the mountain of cash just kept getting higher. According to some accounts, former CEO Steve Jobs had been haunted by Apple's lean years in the mid-1990s, and some observers believe he stood in the way of returning cash to shareholders. Jobs died in October.
During a conference call with analysts in January following the earnings report, Apple's cash was the subject of some tantalizing comments by the company's executives, who raised the possibility of Apple making some earthshaking acquisitions in the coming months.
On Monday, after first giving a glowing update on Apple's product sales, Cook made it clear that the company had more than enough cash on hand to give some of it back to shareholders and still have enough left over to innovate and bring new products onto the market. And because of the tax hit Apple would take if it tried to bring back cash it was holding outside the United States, the dividend and repurchase program would be paid for with its pile of domestic cash.
"Because of the tax consequences of repatriating the foreign cash," Cook said, "we focused on the domestic cash. Our main goal is make the most innovative products in the world, and we decided how much we needed to do that.
"We also looked at other things we might invest money in that would come out of domestic cash," he continued. "After we'd done that and allowed for a war chest for things we can't predict, we had extra cash left over. We have plenty to run the business, and we felt it would be the right action to declare a dividend.
"It's great for shareholders," he said, "and it's fantastic for attracting new investors."
Declaring a dividend has important benefits: It would reward shareholders and open ownership of Apple shares to a wider range of funds. Many "value-oriented" funds are not allowed to buy stocks that don't pay dividends.
Analysts say the lack of a dividend or other meaningful way of using the cash has held down Apple's share price, even though its price remains at nosebleed levels. Partly in anticipation of a dividend, Apple's stock has risen steadily since the Jan. 24 conference call, closing much of the gap between analyst price targets and the actual stock price. In February,
Story tags » Apple




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