August 30, 2012 (AAPLTrader)

On March 19, 2012, Apple Inc. (NASDAQ: AAPL) announced plans to initiate a dividend of $2.65 per share and a share repurchase program.

August 9, 2012 was the first time AAPL has paid back shareholders since 1995. Beginning September 30, 2012, Apple is set to repurchase $10 billion of their own shares.

Apple expects the dividend to cost $2.5 billion per quarter, making them one of the largest dividend payers in the United States.

Why A Dividend?

Apple has plenty of money and part of their business success is taking care of the customer.

Having a dividend for shareholders will broaden Apple's investor base by attracting new investors who don't currently own AAPL stock.

Investors look for stocks that will pay them a healthy dividend. Receiving money in return for an investment is better than not receiving any money at all. A decent dividend yield is part of the screening process money managers go through before investing in a company.

"I believe Apple's brightest and most innovative days are ahead of it.” Tim Cook  CLICK to TWEET this quote.

Repurchasing Shares

Stock repurchases help companies inflate their earnings per share because it reduces the number of shares outstanding. However, profit growth has rarely been a problem for Apple. After Apple's recent spike to all time highs, it's clear to investors that Apple's hard work to sustain their "ecosystem" and grow their "critical mass" is paying off thus rewarding investors handsomely.

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Apple explains that the dividend combined with the repurchase program will likely utilize $45 billion of its domestic cash through 2015. Apple's dividend yield is nearly twice the average for the tech companies in the S&P 500, but a bit less than the 2.1% average for the overall S&P 500.

Is Apple Slowing down?

Apple currently has a yield of 1.59% and a 3 month volume average of 14,136,000. Dividends can often be a sign that a company is slowing in growth and starting to weaken. But I don’t think that’s the case for Apple at all. As far as I'm concerned, Apple just recently hit new all-time highs at $680 and is projected to hit $750 by the end of the year.

Apple is the most valuable company in the world. I don't see this changing any time soon.

 

Trade On,
Eric Consiglio
AAPLTrader Technical Strategist