Apple Inc. shares reach ex-dividend as it gears up to distribute $2.9 billion to shareholders

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On February 11, Apple will pay shareholders of record a quarterly dividend of $0.52 per share, but investors must have had settled ownership of the company's stock by Monday February 8 in order to qualify. Apple will pay out $2.898 billion in dividends on its outstanding shares for the quarter.

Apple has been paying its shareholders a dividend about a month and a half after the end of each fiscal quarter ever since it declared its modern dividend plan in the summer of 2012.

The February dividend will be the seventh to occur since the company issued a 7-for-1 stock split. That split also converted the dividend from $3.29 per share to 47 cents per share.

It will be the fourth 52 cent dividend Apple has paid since it announced plans to increase its dividend from 47 cents during its Q2 2015 earnings conference call.

Apple is likely to increase its dividend before the next quarter's distribution in May, as is indicated in its statements in 10K filings that note, "the Company also plans to increase its dividend on an annual basis, subject to declaration by the Board of Directors."

Over the past four quarters, Apple has paid out around $11.5 billion in dividends to its shareholders, distributing close to $3 billion every quarter, although that number has decreased slightly in tandem with the company's stock buybacks.

AAPL Buybacks

Dividends are a minority portion of Apple's shareholder capital return program, the majority of which has been earmarked for buying back outstanding shares.

Buybacks increase the scarcity, and therefore value, of Apple's stock by taking shares off the market and retiring them. Removing shares from circulation also enhances the company's closely-watched earnings per share metrics. Over the last four quarters, Apple has repurchased $34 billion worth of its stock off the market or via accelerated repurchase programs.

Capital Return AAPL Q1 2016

In total, Apple has spent $110 billion on stock buybacks since initiating its capital return program, including an opportunistic $14 billion share grab initiated after the stock plunged more than 8 percent last January following the company's holiday Q1 release which detailed its highest ever quarterly revenues and operating profits— results that the tech media depicted as "disappointing."

This happened again last summer after Apple announced record earnings in June but market players raised the fearsome prospect of weak sales in China. Apple's shares again tanked, enabling the company to opportunistically snatch up $14 billion of its own shares at what was then the lowest point in 2015.

Apple subsequently announced blockbuster earnings for Q4, particularly in China where revenue nearly doubled and iPhone sales grew by 87 percent in a market that only grew by 4 percent (meaning that outside of Apple, the market for smartphones actually contracted). Apple also guided for growth higher than analysts were expecting. That correction in intelligence sent Apple's stock up a relatively meager few percent, followed by a massive collapse resulting from new rumors of supplier cuts that were interpreted as representing a massive decline in iPhone demand.

However, those rumors did not materialize in Q1 results. Instead, Apple provided guidance for Q2 to indicated a much smaller decline year over year than the rumors had anticipated. Even so, Apple's shares have continued to fall to levels not seen since the summer of 2014, before iPhone 6— the most popular and massively successful computing device ever sold— appeared.

iPhone 6s is currently achieving similar sales, while Apple's valuation has returned to the days of iPhone 5/5s.

Combined with dividend payments and net share settlements, Apple has spent about $153 billion on capital return since mid 2012; it plans to return a total of $200 billion over the next five quarters. Because that total is already allocated, Apple has nearly $47 billion to spend on buying back its stock immediately at today's extremely low prices.

AAPL Buyback History

Prior to its 2014 stock split, Apple spent about $50 billion buying back shares at prices ranging from around $50 to $90. Since the stock split, Apple has repurchased shares at prices from $100 to $130 per share, significantly higher than the current stock price of $94.02— indicating that Apple expects its stock to recover and appreciate to much higher levels.

Those post-split buybacks include a surprising $17 billion of its own stock in the September 2014 quarter; $5 billion of stock in open market purchases during its December 2014 quarter (Apple's Fiscal Q1 2015); another $7 billion of stock in open market purchases during its March quarter (Apple's Fiscal Q2 2015); another $4 billion of stock in open market purchases and $6 billion in Accelerated Share Repurchase in the June quarter (Apple's Fiscal Q3 2015); followed by an astounding $14 billion of stock in open market purchases in the September quarter (Apple's Fiscal Q4 2015) and 6.9 billion in the most recent December quarter.

The relatively conservative (for Apple) $6.9 billion spent on buybacks in the December quarter suggests that the company hesitated to buy up large numbers of shares, and instead reserved its allocated buyback funds to spend in the current quarter instead, in anticipation of much lower stock prices.

As of January 8, 2016, the company now has 5.545 billion shares outstanding.

Apple shares outstanding Q1 2016. Source:

Since the beginning of 2014, Apple shares are up 17.51 percent, compared to Microsoft's 34.5 percent gain or Google's 22.35 percent gain in nonvoting GOOG C class shares and 25.73 percent gain in standard GOOGL A class shares.

Since the start of 2015, Apple shares are down 14 percent, compared to Microsoft's 7.26 percent gain or Google's 30.25 percent gain in nonvoting GOOG C class shares and 32.89 percent gain in standard GOOGL A class shares. Google split its shares into the two classes and awarded investors one of each, effectively stripping investors of half their voting rights through the "dividend" dilution.

Apple MSFT GOOG Q1 2016

Despite massive buybacks, Apple still has a growing pile of cash

Apple is currently using much of its domestic U.S. cash flow to finance stock buybacks and dividend payments, and is also issuing bonds at extremely low interest rates to help pay for its capital return programs.

It currently holds $200 billion of its total $216 billion cash reserves overseas; spending those funds domestically would incur a substantial tax penalty unless the U.S. Congress approves a tax break to enable and incentivize American firms to invest their foreign earnings in America.

In October 2013, after four months of investigation of Apple's foreign earnings and taxes, the U.S. Securities and Exchange Commission ended its inquiry without plans to take any further action after finding no evidence of wrongdoing by the company.

Investors generally view cash as bad for companies to hoard (due to low returns from conservative investments), but Apple can't currently distribute more cash to shareholders without incurring a substantial U.S. tax penalty.

That has made Apple's vast cash holdings a convenient problem to have, because it enables the company to borrow at interest rates very close to zero for domestic investment and capital returns to shareholders while still maintaining vast market power to make long term component deals and strategic investments ranging from acquisitions to expansions of its retail network and its production capabilities.

Apple expects to invest $15 billion in infrastructure, tooling, retail and other capital expenditures in fiscal 2016.


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