The company said it will pay shareholders $2.65 per share each quarter beginning in Apple's fiscal fourth quarter, which starts July 1. The company said it hopes the dividend will make Apple stock a more attractive investment to wider base of investors, including those looking to make regular income from owning the stock.
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In a conference call with investors this morning, Apple Chief Executive Tim Cook and Chief Financial Officer Peter Oppenheimer said the company would spend $10 billion on a three-year stock repurchase program. Apple is buying back shares largely to be able to award more stock to its employees without diluting the value of existing shares, which happens when a company slices itself into a larger number of smaller shares.
The company said it would spend about $45 billion on the combined initiatives over the next three years.
Good news, then, for those people who want to make money without working for it - "those looking to make regular income from owning the stock." Apple's got your bank account covered. And what of the other $55 billion? No mention of that.
While the business news is abuzz with talk of dividends, the real issue goes unexamined; how did Apple amass such a large cash stockpile in the first place? Being stingy to investors is one answer. Apparently, Apple hasn't issued a dividend payment in more than a decade according to Yahoo!Finance. But let's consider alternative explanations, beginning with the following reminder:
profit = price - cost
Alternative 1: Apple's massive profits arise from a cost that is too low relative to what its products sell for, which means that the manufacturers are being short-changed ("exploited" in revolutionary-speak). Considering that Apple has succeeded in selling pricey products, it seems reasonable to conclude that customers at least tacitly accept that the high prices reflect the high value of the products. I'd argue that Apple depends, in part, on the high prices to drive the impression of a premium brand, raising the question of whether the market would rate Apple so highly if it offered dirt-cheap products.
Alternative 2: The manufacturers are reasonably paid, and it is the price that is too high relative to the cost. In this case, it means that Apple customers are being overcharged for the products they buy. Cue Steve Jobs real marketing genius; persuading people to dish out more money than they should for products they don't really need.
The overall conclusion is: whether Apple is scrooging investors, underpaying manufacturers, or overcharging customers, its $100 billion of stockpiled cash is the result of an exploitative business strategy, aided and abetted by an uncritical customer base susceptible to hype. Some would gush about how that makes Apple a capitalist success story. I'd argue that by extracting considerably more money from the economy than it puts in, it makes Apple the poster child of exactly what's wrong with our capitalist economy and consumerist culture.
