Technology giant Apple – a key holding of Threadneedle’s Cormac Weldon – has unveiled plans to pay a dividend for the first time since 1995 and embark on a share buyback programme.
Commentators suggest the move could see other cash-rich US companies increasing the dividends offered to their shareholders.
The California-based firm says it will pay a quarterly dividend of $2.65 (£1.67) per share at some point in the quarter starting July 1. Apple has cash reserves of about $98 billion, some of which was widely expected to be channelled towards dividends
In addition, the firm will begin a $10 billion share repurchase programme commencing September 30. This will be carried out over three years, with the aim of neutralising dilution from future employee equity grants and employee stock purchase schemes.
About $45 billion is expected to be spent over three years on dividends, share repurchases and in connection with the firm’s restricted stock units.
Tim Cook, chief executive of Apple, says: “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.
“Even with these investments, we can maintain a war chest for strategic opportunities and have plenty of cash to run our business. So we are going to initiate a dividend and share repurchase programme.”
Apple is the top holding in Weldon’s £1.8 billion Threadneedle American and £1.7 billion Threadneedle American Select funds, where it accounts for a respective 6.8%* and 8.7%* of the portfolios. (article continues below)
It is also owned by Mike McNaught-Davis’ £1.6 billion Scottish Widows HIFML International Growth fund **, Aled Smith’s £1.2 billion M&G American fund* and Ian McVeigh and Steve Davies’s £716m Jupiter UK Growth fund**.
Paul Atkinson, head of North American equities at Aberdeen Asset Management, says Apple’s dividend is part of a “welcome trend” of cash-rich businesses returning money to shareholders.
“Technology companies in particular have very strong, cash-rich balance sheets,” he adds. “We expect to see more US companies follow Apple and those that already pay dividends will also increase their levels of payouts.”
* as of February 29
** as of January 31