Apple’s next hot release: Dividends

NEW YORK – Apple made computers sexy. Can it do the same for the musty old dividend?

Issuing a regular payment to your stockholders after years of just amassing cash used to be an admission that your company has run out of creative ideas to grow profits.

The quarterly check for a buck or two was more associated with staid utilities than sleek tech companies.

“It wasn’t sexy,” says John Buckingham, chief investment officer at Al Frank Asset Management. “Now the cool guy is doing it.”

Apple said Monday that it would begin paying a quarterly dividend of $2.65 per share starting this summer after years of resisting the idea. its late former CEO, Steve Jobs, always thought the company could make better use of its cash.

But the hoard of cash and securities grew so large — $97.6 billion, more than the entire market value of all but 15 companies in the Standard & Poor’s 500 — that Apple had no use for it.

So it took the risk of looking like a fuddy-duddy and reversed its policy. Apple also announced that it planned to buy back $10 billion worth of its stock in the next fiscal year, which begins in October.

Investors pushed the stock up 2.7 percent Monday to $601.10. That’s on top of a 37 percent gain since the company first hinted in January that a dividend may be coming.

Perhaps the rise in Apple stock isn’t surprising. after years of pulling money out of stocks, investors are cautiously returning, but they’re demanding dividend payments. Three-quarters of the $3.6 billion that investors added to stock funds in February went to funds specializing in dividend-paying companies.

It wasn’t so long ago that a dividend announcement by a tech company was perceived as a kiss of death.

When Microsoft announced its first dividend in 2003, some investors feared it was a sign that its best days were behind it. Judging from its stock, which has gone nowhere for most of the past nine years, they turned out to be right.

Cisco, whose stock price hasn’t moved much since the end of the dot-com craze a decade ago, finally decided to issue a dividend last year. Amazon and Google still don’t pay a dividend. Neither does Dell, which has been around for a generation.

Tim Holland, portfolio manager at Tamro Capital, says a dividend is seen as “taboo” for many companies, but he likes Apple’s decision.

“The company keeps delivering,” he said.

Apple’s next hot release: Dividends


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