Apple investors get richer with big dividend payment

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Apple will start paying shareholders a $9.9 billion annual dividend, which is equivalent to $10.60 a share or a roughly 1.8% yield with Apple shares trading at nearly $600. This dividend, the largest initial one ever by a U.S. company, comes on top of large stock price gains enjoyed by investors. Shares of the gadget maker are already up 70% the past year.

The dividend ushers in a new era for Apple, where the company financially transitions from being a scrappy upstart that pours its profit into new products, into more of a mature firm that generates more cash than it can use. Apple is now the second largest dividend payer, just behind telecom utility AT&T at a $10.4 billion annual payout.

And the move makes Apple less of a speculative play and more of a candidate for investors looking for a mature company. The dividend is a steady payment of cash for investors who have become accustomed to collecting on the stock's breathtaking capital gains. Apple's 1.8% dividend yield is in line with the Standard & Poor's 500's roughly 2% yield.

Given the sheer size of the dividend, investors may be wondering:

• What does the fact Apple is paying a dividend mean for the company and stock market?

The dividend signals a significant financial shift for Apple, as the company's profitability far outstrips its internal needs for expansion, research and hiring. Apple's dividend is the largest new dividend ever paid by a company, beating the $1.3 billion record previously set by Cisco Systems, says S&P Capital IQ.

Apple's dividend further extends the record dividends being paid by S&P 500 companies this year. Just Apple's dividend alone increases the S&P 500's payment by 3.9%.

Apple's dividend is so massive, it's even shifting the financial performance of the entire technology sector. The tech sector, which once shied away from dividends because they were regarded as a refuge for companies with no growth, is now the second largest payer of the 10 sectors S&P Capital IQ tracks. The tech sector's dividends account for 13.5% of all dividends paid by S&P 500 stocks, following consumer staples at 14.8%. Apple's dividend increases the total dividends paid by the tech sector by nearly 32%.

And the fact Apple can afford such a giant dividend is a testament to its power not only in technology, but in music, gaming, retailing and entertainment. Apple's market value, which rose 2% after announcing the dividend to $558 billion, makes it 4.3% of the market's total market value, just behind IBM's historic 6.4% weighing at the height of its power in 1985.

• Does this use up much of Apple's cash pile?

It hardly makes a dent. Apple is sitting on nearly $100 billion in cash and investments, and that sum continues to mount. Last year, the company accumulated $45 billion in cash from operations, spending just $4.4 billion in cash for capital expenditures, like plant expansion or equipment. The company's dividend uses up just a quarter of the cash the company generates in one year.

Along with the dividend, Apple announced plans to buyback $10 billion of its stock over the next three years. Apple says the dividend, stock buyback and cashing out of some restricted stock, will use $45 billion of cash over the next three years.

• Who gets the dividend?