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Apple Thinks Their $600 Share Price is Too Low

Apple has a stack of money so huge that they could buy their major competitors just to make them go away, and today they told us what they plan to do with it.

They’re going to use approximately $45 billion of the $100 billion on a couple of things. First, they’re bringing back the dividend which was stopped when Apple was in dire straights back in the late 1990s. They’ll pay a quarterly dividend of $2.65 per share sometime in the fourth quarter of their fiscal 2012, which begins on July 1, 2012. The dividend payments will run to around $2.5 billion dollars per quarter (should add up to over $30 billion over the next 3 years).

And the rest of the money will be used to raise the stock price to $1k. Apple plans to spend around $10 billion on this.

I’m kidding. I think it’s more likely that Apple knows that the current $600 price for a single share of Apple stock is not sustainable. That means the price will go down eventually, which might be interpreted in a negative way. So I would guess that Apple is planning for the inevitable decline. Of course, buying stock just to keep the price up is only a stopgap measure. Eventually Apple will run out of money that they can spare for the effort. They’ll find better things to spend it on (new tech, I bet).

And yes, I do now that the stated reason for the buyback was "neutralizing the impact of dilution from future employee equity grants and employee stock purchase programs." I’m not sure that’s the reason – not unless Apple is worried about employees cashing out right away.


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Alexander Inglis March 19, 2012 um 1:44 pm

Apple will spend $10 billion on share buybacks over three years. That’s repurchasing 16 million shares out of 932 million outstanding. That will not drive the share price higher.

Apple will spend $2.65/sh per quarter on dividends or approx $30 billion over three years as you have stated. However, 2011 profit was $44 billion which means, if trends continue, Apple would be paying out 23% of earnings in dividends and 7% in share buy backs.

Apple could easily end up with more than the current $100 billion in the bank three years from now, even after returning money to shareholders. (Many industries, btw, return 50% or more annually to shareholders so even 23% looks a bit skimpy.)

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