Apple (NASDAQ:AAPL) gave its shareholders an early Valentine’s Day gift this week as the company paid out a cash dividend of “$3.05 per share of the Company’s common stock” on February 13. Apple was originally expected to pay out nearly $3 billion in dividends based on its 891.99 million outstanding shares. However, the company trimmed its final dividend payout to approximately $2.6 billion thanks to $14 billion of “opportunistic” and “aggressive” share repurchases that CEO Tim Cook recently revealed in an interview with the Wall Street Journal.
Although Cook was “surprised” by the 8 percent fall in the company’s share price on the day following its earnings announcement on January 28, the company decided to take advantage of the price drop by accelerating its previously announced $60 billion stock buyback program. Cook also noted that “updates” to Apple’s share repurchase program will be revealed in March or April of this year.
According to Apple insider, Apple’s $14 billion likely bought it about 28 million shares, reducing its total number of outstanding shares to around 860 million. Since Apple doesn’t need to pay dividends for the shares that it repurchased, the recent buyback action likely saved the company about $85.4 million in total quarterly dividend costs.
Last April, Apple announced a significant expansion to its capital return plan, including $60 billion for share repurchases that will extend through 2015. “We are very fortunate to be in a position to more than double the size of the capital return program we announced last year,” observed Cook. “We believe so strongly that repurchasing our shares represents an attractive use of our capital that we have dedicated the vast majority of the increase in our capital return program to share repurchases.”
Apple’s aggressive capital return moves appear to have satiated activist investor Carl Icahn, who has long been demanding that the company return more cash to shareholders. Icahn recently dropped his buyback expansion proposal in an open letter to investors that cited Apple’s recent $14 billion of share repurchases.
Financial information and services company Markit predicted that Apple will pay out $11.8 billion in dividend payments this year, about 15 percent more than last year. According to Markit data cited by Forbes, Apple may become the biggest dividend payer in the S&P 500 index in 2014.
Despite the increase in dividend payments and share repurchases, Apple is estimated to have a hoard of cash and marketable securities that is worth nearly $159 billion. Apple’s large overseas cash pile and the California-based company’s tax strategies were the focus of a Senate hearing last year. However, the hearing concluded that Apple was in compliance with existing tax laws in the U.S. and in Europe. Although Apple was accused of utilizing tax avoidance strategies, the company is known to be one of America’s largest taxpayers. “To our knowledge Apple is the largest corporate taxpayer in America,” Cook told the U.S. Senate in 2013 according to VentureBeat. “We paid $6 billion in cash to the U.S. Treasury — that’s $16 million each day. And we expect to pay even more this year.”
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