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I am the founder of the Braeburn Group of independent AAPL analysts and author of the Posts At Eventide web presence. The objective of my work is to benefit readers seeking to understand Apple's financial performance and to provide a repository of information and analysis at my web presence for... More
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  • Implications Of Apple's Dividend Announcement 4 comments
    Mar 19, 2012 11:02 AM | about stocks: AAPL

    Apple's announced quarterly dividend of $2.65 will be amply financed from ongoing domestic operations and will not diminish the company's current cash holdings of over $100 billion. Apple is currently generating cash at the rate of over $1 billion per week. The annual dividend, at the announced rate, will require an annual cash distribution of just over $10 billion based on an estimated 950 million fully diluted shares by the September quarter.

    Similarly, the $10 billion in share repurchases over three years can be amply financed over that time from domestic operations. These announcements represent plans for use of cash from ongoing operations rather than use of the company's current holdings of cash and marketable securities.

    The share buyback is intended to neutralize the impact of future share dilution from stock-based compensation rather than as a move to diminish the number of shares currently outstanding.

    The impact of the reinstatement of a regular quarterly dividend is that it will open the floodgates of investment in Apple by conservative mutual funds and institutions that restrict investment to equities that pay a regular dividend.

    The anticipated rise in the share price and the company's market value from the resumption of a quarterly dividend program due to the increase in share demand by conservative funds and institutions (as well as small investors who prefer dividend paying stocks) will be far greater than the amount of cash distributed annually through the dividend program.

    Disclosure: I am long AAPL.

    Stocks: AAPL
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Comments (4)
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  • Stephen J Melnykevich
    , contributor
    Comments (1322) | Send Message
    What would be your updated price target moving forward?
    19 Mar 2012, 01:07 PM Reply Like
  • Posts At Eventide
    , contributor
    Comments (966) | Send Message
    Author’s reply » Stephen:


    I will be updating my price target following release of Apple's March quarter results. I expect very strong results over the balance of the current fiscal year and continuing share price appreciation through calendar year 2012.
    20 Mar 2012, 01:15 AM Reply Like
  • Carousel
    , contributor
    Comments (349) | Send Message
    mr Leitao,
    i'm a big fan of your reasoned and calm analysis. as a long time aapl shareholder, i certainly hope you're right in your current analysis. i'm sure apple will continue to execute like gangbusters, but i'm really just worried about the larger macroeconomic climate. we saw in 2008 how it can affect even apple, and i don't doubt that it can happen again. i just hope we reach your target before that happens.


    thanks for your input, it really is valued.
    21 Mar 2012, 02:22 AM Reply Like
  • Posts At Eventide
    , contributor
    Comments (966) | Send Message
    Author’s reply » Carousel:


    Thank you for your comment. Apple has realized extraordinary rates of revenue and earnings growth during challenging economic times. Geographic expansion and continuing product innovation are key to the company's rates of growth over the next few years.
    22 Mar 2012, 12:45 AM Reply Like
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