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Kill them with kindness: Apple launches 'charm offensive'

By Catholic Online (NEWS CONSORTIUM)
4/24/2014 (3 years ago)
Catholic Online (www.catholic.org)

Stock splits, huge dividend increases intended to win back investors

Sometimes, it's best to kill them with kindness. Investors with Apple are growing disappointed with slower than usual growth. To address, the tech giant is planning a "charm offensive" to garner enthusiasm. Part of that strategy will be stock splits and huge dividend increases. 

'We are planning for annual dividend increases,' CEO Tim Cook on a conference call with investors said.

"We are planning for annual dividend increases," CEO Tim Cook on a conference call with investors said.

Highlights

By Catholic Online (NEWS CONSORTIUM)
Catholic Online (www.catholic.org)
4/24/2014 (3 years ago)

Published in Business & Economics

Keywords: Apple, stock splits, incentives, investors


LOS ANGELES, CA (Catholic Online) - Apple grew its revenue to $45.6 billion at the beginning of this year. Apple performed well above analysts' predictions of $43.5 billion in revenue. 

A seven-for-one stock split in order for every investor will get six additional shares. Apple has performed stock splits in 1987, 2000 and 2005, only on a much smaller scale. Apple has done only two-for-one stock splits in the past where investors received two shares for every one they owned.

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On news of the stock split, Apple's stock rapidly jumped eight percent, or $42 in after-hours trading, landing at $566 before stopping.

Another incentive offered to investors was by growing its spending on dividends and share buybacks by one-third to $130 billion. Stockholders like dividends because they promise easy and reliable income. The generous Apple is raising its dividend twice in two years and paying $11 billion annually to its shareholders.

Investors like share buybacks as it allows them to get premium prices for their stock. The companies in turn use their cash, which otherwise lays dormant unless it is invested somewhere.

"We are planning for annual dividend increases," CEO Tim Cook on a conference call with investors said.

The stock split is hoped to achieve several of Apple's financial goals to please investors, who have been looking to the company to dazzle with new product offerings.

The split will also make it more expensive for large investors to gain a large stake in the company, which may go towards some way towards fending off activist hedge fund managers like Carl Icahn and David Einhorn, who have dogged the company in recent years to force it to boost the price of its stock.

Icahn had persuaded the company to use some of its infamously large cash hoard of over $140 billion to pay dividends and buy back its own stock. His efforts helped raise Apple's stock to $529.

While Apple has faced down those activist investors, the company has not dazzled on its growth or results.

"The thing that drives us are the next iPads, if you will, the things in the pipeline," Cook says.

"People want something great - insanely great," Cook said of the company's plans for acquisitions. "And that's what we want to deliver."

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