Apple Inc, the world's most valuable company, said Monday it will initiate a regular quarterly dividend of $2.65 a share in July and will buy back up to $10 billion of its stock starting in fiscal 2013.

The share buyback program is expected to be executed over three years, with the primary objective of offsetting the impact of employee stock options and equity grants.

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, Tim Cook, Apple`s CEO, said in a statement.

Cook said the company would still maintain a war chest for other strategic opportunities.

The company said it anticipates using around $45 billion of domestic cash in the first three years of its buyback and dividend programs.

The maker of the iPhone, iPad and iPod has $98 billion in cash and securities, equal to about $104 a share according to ISI Group analyst Brian Marshall.

Apple last paid a dividend in 1995, Thomson Reuters data show. In 1996, Apple posted a net loss of $816 million. Apple is an overcapitalized company and it's probably better to have the cash in the shareholders' pockets than in Apple's pockets, said John Strand, chief executive of Copenhagen-based Strand Consulting.

Apple shares were up by 1 percent in premarket trading after being halted earlier in the morning.

For a lot of people who own this stock, some dividend is better than no dividend, said Colin Gillis, an analyst at BCG Partners.

(Reporting By Yinka Adegoke; additional reporting by Tarmo Virki in Helsinki; editing by John Wallace)

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