Apple to issue dividend and $10B share buyback

Shares jump on news of Apple's first dividend since 1995 at $2.95 a share and buyback

Apple has finally given investors an idea what it will do with all that cash we knew it has on hand -- initiate a dividend and share repurchase program.

In a conference call early Monday, CEO Tim Cook announced that the tech giant will use $45 billion over the next three years of the near $98 billion of cash it has on hand.

The company said it plans to offer a quarterly dividend of $2.65 a share sometime in the fourth quarter of its fiscal 2012 -- which begins July 1.

So for the second time in the history of the company, it will offer a dividend.

Apple also announced its Board of Directors has authorized a $10 billion share repurchase program commencing in the company's fiscal 2013, which begins Sept. 30. 

"We have used some of our cash to make great investments in our business through increased research and development, acquisitions, new retail store openings, strategic prepayments and capital expenditures in our supply chain, and building out our infrastructure," said Cook. "Even with these investments, we can maintain a war chest for strategic opportunities and have plenty of cash to run our business."

Apple has been feeling the pressure by investors to use some, if not most, of its $100 billion in cash it had accumulated in the past few years. 

Apple has been shockingly frugal over the last few years, even after iPhone and iPad sales rocketed the company cash and stock to unparalleled levels.

One analyst with Sterne Agee, Shaw Wu, feels like these shareholder-friendly moves made by Apple were a "strong sign that management is very confident in the company's future prospects."

Wu told me that the $10 billion share repurchase program will work well "to neutralize the impact of dilution from future employee equity grants and stock purchase programs."

"We did not anticipate this as we are not as upbeat on stock repurchases as we are on dividends as we find dividends are more tangible," Wu said. "But nonetheless, we view these as shareholder friendly moves."

In January, Apple unveiled an earnings report, showing a 118% increase in profit. Cook said the company will still continue to invest in research and development, new retail store openings, acquisitions and building out the company’s supply chain, in addition to the stock dividend plan.

“Combining dividends, share repurchases, and cash used to net-share-settle vesting RSUs, we anticipate utilizing approximately $45 billion of domestic cash in the first three years of our programs,” said Peter Oppenheimer, Apple’s chief financial office, said in a statement. “We are extremely confident in our future and see tremendous opportunities ahead.”

Many were expecting some type of dividend or repurchasing program and since late January, Apple stock has risen 37%. 

And just as the new iPad hit store shelves, reports were coming in that Apple has an even firmer grasp on the tablet market. 

About 84% of IT buyers in the market for tablets are banking on getting iPads, according to a newly-released report by ChangeWave Research. That is the highest percentage that ChangeWave has ever seen -- in fact, it is a seven percentage point jump since the survey last quarter.

This survey, which looked at more than 1,600 businesses, shows that Apple is tightening its grasp on the tablet market, especially in the workplace.

Just about 22% of the buyers surveyed said that they will be buying some type of tablet for their employees in Q2 -- and an overwhelming majority of those determined to buy tabelts will have that shiny apple on the back.

And just last month, Apple shares broke the $500 level for the first time (and even spent a limited time above $600).

Wu explained that it is still a fair time to buy and stay invested with Apple. 

"Apple is positioned to outperform in this tough macroeconomic environment with its defendable strategic and structural advantages and its vertical integration," Wu explained. "Our price target of $620 is based on a conservative 12x multiple on our CY12 EPS estimate of $43.24 plus net cash."

Apple (NASDAQ:APPL) is the world's most valuable publicly traded company, with a market capitalization of $545 billion. The company's shares are up $9.30 to $594.97 in early trading.