Apple Inc. (NASDAQ:AAPL) was not exactly known for generosity toward shareholders before, as late CEO Steve Jobs preferred to always have a large stockpile of cash on hand at headquarters. But now that CEO Tim Cook is in charge of the tech giant, the mood has shifted. The company reached out to its investors recently to get their feedback, and Thursday history will be made when Apple distributes its first-ever dividend.
Granted, compared to an Apple Inc. (NASDAQ:AAPL) stock price of $630, a $2.65 dividend per share is very small, but the step for Apple to give out some of its massive $100 billion cash pile to investors is noteworthy in its own right. Of course, the cash reserves would deplete pretty quickly if Apple has too many more quarterly reports that are as disappointing as the most recent one, but since the company has only missed two reports in the last 10 years, that seems pretty unlikely.
The dividend idea came about as Cook solicited and received feedback after starting a $10 billion stock buyback program in March. Though the dividend is pretty paltry, the expectation that Apple Inc. (NASDAQ:AAPL) stock will bounce right back toware record highs may not necessarily be in the cards. Patience will be the virtue of the day for investors.
"The fact that they had a disappointing quarter doesn't change things much because the dividend is still relatively small as compared with the company's current cash balance," said Dave Denis, professor of business at the University of Pittsburgh. "The dividend is still a big deal, though, in that the company is implicitly committing to continue the payment of this dividend in the future. That will gradually reduce the company's cash balance over time if operating profits continue to be disappointing."
With all of the buzz and hype about Apple Inc. (NASDAQ:AAPL) and its impending release of the iPhone 5 (and rumors of other devices as well to go with the new iOS 6), would even a record-breaking launch period be considered disappointing? For those major investors in Apple, Inc. (NASDAQ:AAPL) - including hedge funds like David Einhorn's Greenlight Capital, which had an $877 million position in Apple stock at the end of March - nearly 16 percent of a multi-billion-dollar portfolio - the answer would probably be "no."