Comment on apples dividend policy

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Reference no: EM133908794

Problem

Case

Given: Apple paid a dividend from 1987 to 1995 ($0.12, $0.32, $0.40, $0.44, and then $0.48 per share from 1991-1995, respectively) but stopped in the second quarter of 1996 after suffering losses. (Apple still paid the first quarter dividend of $0.12 in 1996 before stopping.) Apple did not pay any dividends through the end of 2011.

On Monday March 19, 2012, Apple announced it would start paying a quarterly dividend of $2.65 per share in the fourth quarter of fiscal 2012 (costing the firm $2.5 billion a quarter or $10 billion a year). The firm also said it would start a share repurchase program. Apple's stock price rose 2.7% ($15.53) to a price of $601.10 on the announcement. The quarterly dividend was increased to $3.05 per share in 2013 (costing the firm $2.9 billion a quarter or $11.6 billion a year), and $3.29 (pre-split) in 2014 (a total of $12.4 billion a year). Apple also had a seven-for-one stock split in 2014. Finally, Apple also repurchased $22.9 billion of stock in 2013 and $35.0 billion of stock in 2014. The share buyback program is being conducted in privately negotiated and open market transactions (complying with Rule 10b5-1 of the Exchange Act).

Finally, the firm issued $17 billion of long-term debt in 2013 (due from 2016 to 2043). Apple also issued $6.3 billion of commercial paper in 2014. The firm's capital structure remained, however, at zero debt once the excess cash is considered. Get the instant assignment help.

Task

Comment on Apple's dividend policy and how it differs in relation to theory of corporate dividends by Miller and Modigliani(1961)

Reference no: EM133908794

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