Asymco:
Today Apple announced both a dividend and a share re-purchase plan which, when combined, will consume 45% of Apple’s current US cash reserves.
The dividend will be $2.65/share/quarter and the buyback will cost $10 billion over three years. The dividend will therefore cost about $2.5 billion per quarter (starting next quarter) and the re-purchase will cost about $833 million per quarter (starting next fiscal year).
However, note that Apple’s cash has been growing far more quickly. It increased by $16 billion last quarter or $37 billion over the last year. This rate of increase is itself increasing.
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This means Apple’s total cash should still grow by more than $35 billion this year.
TL;DR—Apple’s cash inflow grows at an increasing rate, that even this cash dispersion strategy will not dampen.
So, it has come to this. They’re earning so much money that they can’t spend it anywhere else, and fast enough. While I’d think that Steve Jobs might disapprove of this measure, but after some thought, I think this move might actually take some pressure of managing such a huge cash-pile off the CFO’s back.
In fact, it is said that Apple’s CFO can probably be considered as a large hedge-fund manager.
Hopefully with this move, we would finally see the market value Apple’s stock appropriately, after so many years of undervaluing AAPL.