When you have more money than God what should you do with it? If you are Apple (full disclosure: I don’t own a share but I am typing this out on a MacBook Pro, I did stand in line on Friday for an iPad and I lovingly sleep next to my iPhone every single night), you give it back to the faithful in the form of a $2.65 per share quarterly dividend. Incidentally, Tim Cook has declined the dividend – which would have been worth many millions to him.
The focus and speculation has been on what Apple will do with its close to $100 billion in the bank. Along with the dividend, Apple is also spending $10 billion on itself – buying shares back. This is what you should be excited about if you are a shareholder – and what Tim Cook is probably banking on. He has indicated that there is no interest in splitting the stock and scarcity is a stock’s best friend. Buying up roughly 17 million shares will certainly add to the “Apple rule of scarcity” – that is to sell out and create a certain level of anticipation and a feeling of accomplishment once product is in hand. I wonder if people will eventually line up over night to buy Apple stock.
This might all seem like a lot of money (quite frankly, it is a lot of money), however the share dividend rate is only 1.81% and just on the news alone the share price has jumped over 2%. That increase has now added $12 billion to the company’s valuation.
Only Apple could turn a $45 billion spend into $12 billion bump.
For those that might complain that there are better things Apple could have spent the money on, remember that the current $100 billion number reflects Apple’s wealth prior to a quarter of selling the new iPad. So for everyone that wants them to go green, donate iPads to universities, or buy Canada: just wait until next quarter.