Apple Dividend

Taking a step back from running for a moment, let's look at the event on Monday from Apple. For the first time since 1995, we shareholders are going to get a piece of the pie. (Not that I am complaining too much, the money Apple made has been reinvested into the company.)

Apple is going to pay out a quarterly dividend of $2.95 pr share. Also a buy back plan worth $10 billion in shares of stock. The payout will begin after July 2012.

Now, let's educate...

A dividend is cash that a corporation pays to its shareholders based on the company's profits.

A buy back is when a company buys back its own shares. It is basically investing in itself. Apple is absorbing $10 billion of its own shares to get rid of some cash. This leaves shareholders who retain their shares in a better position as it reduces the number of shares on the market, which makes each share worth more. As those shares are now above $600 apiece, I, for one, shudder with anticipation at the future.

Onto the particulars...

Now early investors in Apple stand to gain from this event. Those who have seen the company grow and grow with each new iPhone and iPad have been waiting years for pay back. Also, Apple hasn't really been using its cash wisely. It has been getting, by some reports, as little as 1% interest on it.

This makes Apple, with one fell swoop, the second largest dividend-paying company, after AT&T. Furthermore, this will make Apple more attractive to conservative investors who shy away from non dividend companies, who are usually every young companies. And there are some mutual funds who cannot, by their own rules, invest in such companies.

And lastly, it's puts Google on notice. It also is a non dividend tech company, along with eBay and Amazon. The pressure will be on these Silicon Valley rivals, especially when the frenzy this generates pushes Apple share higher.