Apple Inc. (AAPL) plans to pay a dividend and buy back $10 billion of its stock, returning some of its $97.6 billion in cash and investments to shareholders as demand for iPhones and iPads boosts earnings.

Investors will receive a quarterly dividend of $2.65 a share starting in the period beginning July 1, Cupertino, California-based Apple said today in a statement. The buybacks will begin in the fiscal year starting Sept. 30 and will take place over three years, the company said.

Apple’s cash pile has swelled amid surging demand for its products, such as the iPhone and iPad. Investors had urged Apple to return some of the balance in the form a dividend. Chief Executive Officer Tim Cook fueled speculation an announcement might be coming when he said this year that Apple had “more than we need to run a company,” and that the board was considering its options.

“We are extremely confident in our future and see tremendous opportunities ahead,” Chief Financial Officer Peter Oppenheimer said in the release. Apple said the company plans to pay out about $45 billion over three years.

The dividend will cost Apple about $10 billion a year and represents a yield of 1.8 percent on the stock’s March 16 closing price. The company generated $16 billion in cash in the first quarter of fiscal 2012, which ended in December. Shaw Wu, an analyst at Sterne Agee & Leach Inc., predicts that Apple will generate about $75 billion in cash this year.

Apple rose 2 percent to $597.31 at 9:30 a.m. New York time.

Record IPad Debut
“This is something that large shareholders have been asking for,” Wu said before the announcement.

Analysts at Morgan Stanley, JPMorgan Chase & Co. (JPM) and Mizuho Securities USA Inc. also had predicted that Apple would institute a dividend. The dividend is in line with estimates from at least four analysts.

The growing amount of money on Apple’s balance sheet followed the introduction of the iPhone, the best-selling smartphone, and the iPad, the leading tablet computer. The company last week began selling a third-generation iPad, which comes with a high-definition screen and faster processor. Apple had a “record” weekend with the new iPad’s debut, Cook said on a conference call today, without elaborating.

Of Apple’s $97.6 billion in cash and investments at the end of December, about $64 billion was overseas.

‘War Chest’
A dividend is a boon to investors who have already seen the company’s stock rise 45 percent this year. Apple co-founder Steve Jobs, who died in October, long resisted calls to return some of the money to investors.

“We have used some of our cash to make great investments in our business through increased research and development, acquisitions, new retail store openings, strategic prepayments and capital expenditures in our supply chain, and building out our infrastructure. You’ll see more of all of these in the future,” Cook said in the statement. “Even with these investments, we can maintain a war chest for strategic opportunities and have plenty of cash to run our business.”

On the conference call, Cook said adding a dividend will expand Apple’s investor pool. Some investors will only buy shares in companies that pay a dividend.

Apple last paid a dividend in 1995, before Jobs returned as CEO and led the introduction of top-selling products including the iPod, iPhone and iPad. The final dividend, of 12 cents a share, was suspended amid leadership upheaval and dwindling computer-market share. According to a company filing, Apple’s cash, equivalents and short-term investments dropped by about half, to $491 million, in the year through Sept. 29, 1995.

Highlighting its turnaround since that period, Apple has surpassed Exxon Mobil Corp. (XOM) as the world’s most valuable company. The iPhone maker’s market value is $545.97 billion, based on its closing price of $585.57 on March 16. That compares with $407.4 billion for Exxon Mobil.

To contact the reporter on this story: Adam Satariano in San Francisco at asatariano1@bloomberg.net