Apple plans to buy back an additional $30 billion of its stock, raise its quarterly dividend by 8 per cent and split its stock for the first time in nine years.
The commitment announced Wednesday as part of Apple's fiscal second-quarter earnings report expands on the company's previous pledge to spend $60 billion on stock buybacks by the end of next year. The company is now earmarking $90 billion for buybacks during that time frame.
Apple Inc. also is raising its quarterly dividend to $3.29 per share as part its effort to funnel more money to stockholders.
The company also will execute an unusual seven-for-one stock split in early June. The move will dramatically decrease the nominal value of Apple's stock, which closed Wednesday at $524.75. The shares soared by more than seven per cent after the news came out.
On Wednesday, Apple reported a 4.6 per cent rise in March-quarter revenue to $45.6 billion, beating Wall Street's projections after selling a sharply higher than expected 43.72 million iPhones.
A slowdown in revenue growth in 2013 prompted investors to wonder whether the company has lost its innovative power since the death of Steve Jobs. The buybacks will increase the price of remaining shares because there are fewer outstanding.
The results for the first three months of the year illustrated how Apple Inc. can afford to spend so much money on its own stock.
Apple's earnings rose seven per cent to $10.2 billion, or $11.62 per share, an amount that exceeds what most technology companies make in an entire year.
Although many analysts had been expecting Apple to distribute more money to shareholders, the stock split came as a surprise. After the seven-for-one split is completed June 9, the trading price of Apple's shares will fall dramatically. Had the split occurred at Wednesday's closing price of $524.75 shares, the stock would probably begin trading at around $75.
More affordable Apple shares
At that level, more people should be able to afford to buy shares — a factor that could, in theory, fuel more demand for Apple's stock and eventually lift the price.
The company's escalating investment in its own stock also could increase the price by reducing the number of outstanding shares. That reduction increases earning per share, a key yardstick on Wall Street to appraise a company's value. Apple's market value currently stands at about $470 billion, more than any other publicly held company.
Since Apple's last split in February 2005, the stock has increased by nearly 12-fold. But CEO Tim Cook told analysts in a conference call that Apple's stock price "does not reflect the full value of the company."
Activist investor Carl Icahn, who had spent months pressuring Apple to buy back more stock, was among those applauding the company's moves. In a Twitter post, Icahn said he is "extremely pleased" and reiterated his belief that Apple's stock remains "meaningfully undervalued."
The results for the first three months of the year illustrated how Apple Inc. can afford to spend so much money on its own stock while also paying more than $11 billion in dividends annually.
The company ended the quarter with nearly $151 billion in cash, including $132 billion it is keeping overseas to lower its U.S. tax bill. The money being held outside the U.S. isn't available to buy back stock or pay shareholder dividends.
Apple's revenue climbed 4.6 per cent to $45.6 billion. It represented the highest revenue that Apple has generated in any quarter occurring outside the holiday shopping season.
Revenue growth stalled
Nonetheless, Apple's revenue growth has been stuck between 1 per cent and 6 per cent for the past year. By contrast, the quarterly revenue of rival Google Inc. has been rising at 12 per cent to 19 per cent during the same stretch.
The quarter was highlighted by a 17 per cent increase in iPhone sales from the same time last year to 43.7 million units, boosted by strong demand in China, the U.S., Western Europe and Japan.
But iPad sales fell 16 per cent from last year to about 16.4 million tablets. Apple traced the decline to its inability to meet the demand for the iPad Mini during the holiday season of 2012. That prompted Apple to ramp up production in last year's January-March quarter, boosting sales higher than they otherwise would have been. The company said it managed iPad demand better during the 2013 holidays.