ROBERT SIEGEL, HOST:
From NPR News, this is ALL THINGS CONSIDERED. I'm Robert Siegel. Apple, the world's most valuable company, has announced that it's going to share the wealth. For the first time since the mid-1990s, the company will pay a dividend to its shareholders. Demand for iPads, iPhones and other iProducts has been so strong that by the end of last year, Apple had amassed a cash hoard of nearly $100 billion.
NPR's Steve Henn reports investors have been clamoring for a dividend and were happy with the news.
STEVE HENN, BYLINE: Apple had an enviable problem. It's not too many companies today that have more cash than they know what to do with.
PETER OPPENHIEMER: In fiscal year '11, our cash increased by $31 billion.
HENN: Peter Oppenhiemer is Apple's chief financial officer.
OPPENHIEMER: During the first quarter of fiscal year '12, we generated another $16 billion.
HENN: To appreciate the scale of Apple's conundrum, consider this: In the last three months of 2011, Apple was generating more than a billion dollars in profit, free and clear, each and every week. By the end of the year, it had enough cash on hand to buy Goldman Sachs, outright. And even after that, it would have had almost enough cash left over to buy General Motors, too.
It's not that Apple hasn't been spending; it has. Over the past few years, Apple spent several billion, locking down critical parts and supplies for the iPhone and iPad. It spent several hundred million, buying a couple small start-ups. And it spent aggressively, opening dozens of new stores around the world.
TIM COOK: Even with these investments, we can maintain a war chest for strategic opportunities, and have plenty of cash to run our business.
HENN: Apple CEO Tim Cook.
COOK: So we are going to initiate a dividend and share repurchase program.
HENN: Starting later this year, Apple will spend about $5 billion annually, buying back its existing stock. This stock buyback program is relatively small and really, just intended to offset any new stock Apple gives out to its employees. Apple will also begin paying a dividend of $2.65 a share this summer. That will cost the company about $10 billion in cash each year.
JOHN LUTZ: It really opens the stock up to a much broader group of investors, you know - principally, value- and dividend-oriented mutual funds.
HENN: John Lutz helps manage a mutual fund that's been invested in Apple for years. Apple stock price has been rising so fast that lots of institutional investors, like Lutz, can't really buy any more.
LUTZ: This is a problem a lot of growth managers have. You know, they are simply capped out in terms of how large of a position Apple can represent in their portfolio.
HENN: But by paying a dividend, a whole new group of institutional investors can start buying Apple stock. These are folks who cater to retirees and other people who need to earn some income from their investments. Peter Oppenhiemer, Apple's CFO, says the company will soon pay out more than $2.5 billion to investors each quarter.
OPPENHIEMER: Which would make us one of the highest dividend payers in the United States.
HENN: But as a percentage of its earnings, Apple is paying less in dividends than other technology giants like Microsoft and Cisco. [POST-BROADCAST CORRECTION: Apple's dividend is less than the dividends of Microsoft and Intel.] And most analysts expect the cash to keep piling up. By the end of the year, it's likely Apple will have more than $100 billion stashed away in offshore accounts. And Tim Cook said this morning Apple had a record-breaking weekend of iPad sales.
LUTZ: The stock price is up 45 percent year to date. It's up tenfold over the last six years. And it's up that because they've been absolutely knocking the cover off the ball.
HENN: Lutz says the news this morning that the stock will begin paying dividends is just a cherry on top. Steven Henn, NPR News, Silicon Valley.
NPR transcripts are created on a rush deadline by Verb8tm, Inc., an NPR contractor, and produced using a proprietary transcription process developed with NPR. This text may not be in its final form and may be updated or revised in the future. Accuracy and availability may vary. The authoritative record of NPR’s programming is the audio record.