After years of hand-wringing over Apple's
Is $45 billion in three years conservative?
However, while the plan is relatively conservative, it should be welcomed by investors. Steve Jobs was notoriously frugal with his cash hoard, even ranting to biographer Walter Isaacson that he'd use every last penny to crush Google's
Also, it's a positive sign that the company plans recurring dividends. Even though I still think Apple is undervalued, tech companies are notoriously lousy at rebuying their shares and investors aren't as receptive to this kind of repurchase of capital from tech giants. Both Microsoft
A bright outlook for yield
While the effective yield of 1.8% that Apple's dividend sets won't make it a dividend titan, that yield should quickly rise. Consider, that even with its payouts, its cash hoard could still eclipse $150 billion by the end of 2012. With some not-so-aggressive targets, Apple's cash hoard alone collecting only 2% to 3% annually could be among the 10 most profitable tech companies in the world by the end of 2014 if it only pays out its announced $45 billion.
Simply put, that means that while Apple started its dividend conservatively, the yield should only be going higher in coming years. Then there's also the fact that this dividend opens the company up to more funds with mandates for yield. All in all, while today's announcement won't sweep anyone off their feet, bigger yields are likely to come in the future.
Keep your perspective
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Eric Bleeker owns shares of Cisco. The Motley Fool owns shares of Google, Cisco Systems, Microsoft, and Apple. Motley Fool newsletter services have recommended buying shares of Microsoft, Google, and Apple. Motley Fool newsletter services have recommended creating a bull call spread position in Apple. Motley Fool newsletter services have recommended creating a bull call spread position in Microsoft. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.
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