Apple is finally giving its shareholders a bite of its cash pile. The company will hand out about $45 billion over three years, including $30 billion of dividends and $10 billion of buybacks. While that’s a good start, Apple could make $50 billion in free cash flow in the financial year ending September. With sales and profit rocketing — and the bulk of its huge cash hoard still stuck abroad — bigger payouts will surely follow.
Apple had $98 billion of cash and investments on its books at the end of December. Close to two-thirds is held abroad, and repatriating it to the United States would involve a big tax hit. So, Apple is keen to avoid tapping this, preferring to let it grow while it awaits a possible tax holiday.
That still leaves $34 billion in the US. Even this domestic stash probably won’t be touched, despite the new payouts. Apple tends to avoid big acquisitions, and has been disciplined with its investments in research, development and the like. And, the dividend is set to start only in the three months ending in September, by which time another few quarters of cash will be in the bank.
Assume Apple does make $50 billion in free cash flow this financial year, and a third of that is in the US. That’s more than enough ongoing flow to cover $15 billion a year of dividends and buybacks. Moreover, Apple’s revenue and profit are growing. The company’s top line increased 73 per cent in the last quarter of 2011 from a year earlier, and earnings more than doubled.
Growth isn’t going to grind to a halt, either. The new iPad went on sale last week and Tim Cook, the chief executive, said on Monday the result was a record weekend. Other new or refreshed products are expected in the fall.
All that means the near-$100 billion cash pile is still going to grow, not shrink. Not surprisingly, shareholders welcomed Apple’s payout announcement, pushing the company’s market value up by approaching $10 billion. But, as the money rolls in, they may soon start asking the big question again: What is Apple really going to do with its cash?
