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Shares of Apple, Inc. go ex-dividend as it gears up to distribute $3 billion to holders

Next Thursday, Apple will pay "shareholders of record" its quarterly dividend of $3.05 per share, but new investors needed to buy the company's stock by the market's close yesterday to qualify.

Apple


Apple automatically pays shareholders of record a dividend about a month and a half after the end of each fiscal quarter. At the previous day's stock price of $465.25, the dividend yield is 2.62 percent.

The next dividend payout date falls on Thursday August 15th for the summer quarter, but the last opportunity for shareholders to qualify for the dividend ended yesterday; shares changing hands two or fewer business days before the dividend record date do not transfer dividend rights.

The reason for the delay, as noted by Philip Elmer-Dewitt last quarter, is an accounting principle know as the "ex-dividend" or reinvestment date, which determines the party owed the dividend when shares change ownership immediately before the dividend is paid. When a share is sold, the transaction does not "settle" for three days.

The stock market (in Apple's case, NASDAQ) automatically adjusts the value of the company's stock by the value of the dividend, as the dividend reduces the value of the company because it is paid from the company's cash holdings.

This is offset by the fact that shareholders are getting the dividend, and can expect an ongoing dividend in the future in addition to the ongoing appreciation of the stock, further enhanced by the buyback program, which increases the scarcity (and therefore value) of Apple's stock by taking it off the market.

Over the past year, Apple has been paying out around $2.5 billion in dividends every quarter, a figure that increased 15 percent to $2.8 billion last quarter when Apple increased the payment to the holders of its 908.4 million outstanding shares.

$109 million less in dividend payments after buying back shares



Beginning last quarter, the company started paying its recently announced "significant increase" in dividends as part of an expanded capital return program.

Apple raised its quarterly dividend from $2.65 per share to $3.05 and added another $50 billion to its stock buyback program.

Apple's stock buyback spent $16 billion over the last quarter buying 36 million shares off the market at an average price of $444.44. Apple still has $44 billion left to invest in itself under the current program over the next two and a half years.


Source: Ycharts.com


Stock buybacks "retire" outstanding shares, leaving Apple with $109 million less in dividend entitlements to pay out just from the 36 million shares it acquired and effectively destroyed last quarter.

The buyback also necessarily raises the company's Earnings Per Share but causes its calculated market capitalization to decrease, although the fundamentals then support a higher stock price given the reduction in overall share count.

Apple's stock buyback was essentially a massive acquisition of itself, larger than than even Google's $12.5 billion purchase of Motorola Mobility. With Apple's stock price now at about $460, the shares it bought last quarter would now cost an additional $576 million if the company had waited.

That explains why the company has blown through its buyback fund over three times faster than the $5.272 billion per quarter average payment it would have made if it had scheduled the buybacks to occur evenly across the scheduled period.