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Tuesday, November 12, 2013, 04:10 pm PT (07:10 pm ET)

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

On Thursday, Apple will pay "shareholders of record" the company's quarterly dividend of $3.05 per share, but investors needed to own the company's stock by the market's close last Wednesday in order to qualify.

Apple


Apple automatically pays its shareholders a dividend about a month and a half after the end of each fiscal quarter. At the current stock price of $520.01, the dividend yield is 2.35 percent.

The next dividend payout date falls on Thursday November 14th for the September quarter, but the last opportunity for shareholders to qualify for the dividend ended November 11; 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 this spring, 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. With Apple's stock price now at about $520, the shares it bought over the last two quarters would now cost an additional $3.1 billion if the company had waited to buy them

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. This is further enhanced by the company's ongoing buyback program, which increases the scarcity (and therefore value) of Apple's stock by taking shares 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 earlier this year when Apple increased dividend payments to the holders of its 899.74 million outstanding shares.

$143 million less in dividend payments after buying back shares



Beginning two quarters ago, the company started paying its previously 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 June quarter buying 36 million shares off the market at an average price of $444.44, then bought up another 10.4 million shares with a $5 billion repurchase in the September quarter at an average price of around $480.


Source: Ycharts.com


Stock buybacks "retire" outstanding shares, leaving Apple with $143 million less in dividend entitlements to pay out after the nearly 47 million shares it acquired and effectively destroyed in the last two quarters.

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 2013 stock buybacks were 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 $520, the shares it bought over the last two quarters would now cost an additional $3.1 billion if the company had waited to buy them.