Apple adds $50B to capital return program, increases quarterly dividend by 10%

AppleInsider

In announcing its first quarterly revenue decline in 13 years, Apple on Tuesday said it will infuse another $50 billion into an ongoing capital return program, a move that comes with a $35 billion boost to the company's share repurchase initiative.

Apple's board of directors authorized the buyback on "strong" results, setting a repurchase authorization at $175 billion, up from $140 billion announced last year. Combined with past returns, the company plans to dish out a total of $250 billion to shareholders by the end of March 2018.

"We generated strong operating cash flow of $11.6 billion and returned $10 billion to shareholders through our capital return program during the March quarter," said Apple CFO Luca Maestri. "Thanks to the strength of our business results, we are happy to be announcing today a further increase of the program to $250 billion."

In addition to the capital returns, Apple said it also plans to continue to net-share-settle vesting restricted stock units.

Related to stock repurchasing activities, Apple announced a 10 percent increase to its quarterly payout to investors, declaring a dividend of $0.57 per share, payable on May 12, 2016, to stockholders of record as of May 9, 2016.

The company said its capital return program has returned more than $163 billion to investors since its activation in August 2012, $117 billion of which came in the form of share repurchases.

lkrupp

How can apple increase dividends when they are filing for bankruptcy tomorrow?

amarkap

Hello, perhaps AppleInsider is not the best place to ask and learn about how stock buy back works but most everyone seems pretty knowledgeable (at least more than me).  So I wanted to ask.  I purchased my shares at $127.00.  Yes, it hasn't been easy to watch the share price plummet on me but I will hold onto the stock so as long as I use Apple products (which I do). 

My one question is that I always thought when companies bought back shares of their own stock that that is supposed to be good for the shareholder and the price ought to go up a little bit.  As I understood the Supply is going down so technically people ought to be paying more to own the fewer shares available.  But that doesn't seem to happen (at least not to the guy holding at $127.00).  So if it doesn't really cause the price to go up for us Shareholders why does Apple keep buying back shares?  Perhaps they can spend that money on something else?  Please don't make too much fun of me for asking this naïve question.

So thank you in advance for any insight and understanding.

koop

sog35 said:

amarkap said:

Hello, perhaps AppleInsider is not the best place to ask and learn about how stock buy back works but most everyone seems pretty knowledgeable (at least more than me).  So I wanted to ask.  I purchased my shares at $127.00.  Yes, it hasn't been easy to watch the share price plummet on me but I will hold onto the stock so as long as I use Apple products (which I do). 

My one question is that I always thought when companies bought back shares of their own stock that that is supposed to be good for the shareholder and the price ought to go up a little bit.  As I understood the Supply is going down so technically people ought to be paying more to own the fewer shares available.  But that doesn't seem to happen (at least not to the guy holding at $127.00).  So if it doesn't really cause the price to go up for us Shareholders why does Apple keep buying back shares?  Perhaps they can spend that money on something else?  Please don't make too much fun of me for asking this naïve question.

So thank you in advance for any insight and understanding.

It may take a while but I think your investment will pay off in the long term.

Yes buying back shares will eventually help the stock price but not always right away. 

This is just my guess but I think Apple will be worth $300 in 10 years. Think long term.  Traders almost always lose money in the market.  Long term INVESTORS make money and wealth and save a ton on taxes also.  If you believe in the company just hold the stock and don't worry about the stock price day to day.  I'm holding over 1000 shares and I'm not sweating one bit.  

Now that is rich.

5150iii

Picked up 20 more shares in after-hours. 

launfall

The share price of Apple stock is a bargain right now, and Apple is wisely buying up shares on the cheap. When I bought 100 shares of Apple about 8 years ago it was at $95/share, but that was before the 6/1 split. At today's price my $9500 is worth $73,500. Apple believes, as do I, that history will repeat itself. I continue to invest my dividends in small Apple purchases of about 10 shares a year. I believe in the company because while they can sometimes be maddingly annoying and high-handed, they make a superior product that I have used since 1982. Buy what you know.

gmgravytrain

lkrupp said:

How can apple increase dividends when they are filing for bankruptcy tomorrow?

I realize you're only being sarcastic, but truthfully, as far as Wall Street is concerned, Apple's value as an investment is worth almost nothing and they may as well be filing for bankruptcy. Wall Street is practically certain Apple has no future. I really feel for that commenter who said he bought Apple at $127 because he'll never see that money again. The big investors have long given up on Apple. The news media loves reviling Apple and thanks to that constant chatter, Apple has fallen far further than Netflix, Microsoft, Alphabet and practically any other tech stock you can care to name this quarter. Apple has been given the kiss of death and there's absolutely nothing Tim Cook can do about it. All we can count on from Apple is some dividends and even those are going to be lower than what other less wealthier tech companies will be handing out. The global economy is bad and Apple's hands are tied.

jonl

amarkap said:

Hello, perhaps AppleInsider is not the best place to ask and learn about how stock buy back works but most everyone seems pretty knowledgeable (at least more than me).  So I wanted to ask.  I purchased my shares at $127.00.  Yes, it hasn't been easy to watch the share price plummet on me but I will hold onto the stock so as long as I use Apple products (which I do). 

My one question is that I always thought when companies bought back shares of their own stock that that is supposed to be good for the shareholder and the price ought to go up a little bit.  As I understood the Supply is going down so technically people ought to be paying more to own the fewer shares available.  But that doesn't seem to happen (at least not to the guy holding at $127.00).  So if it doesn't really cause the price to go up for us Shareholders why does Apple keep buying back shares?  Perhaps they can spend that money on something else?  Please don't make too much fun of me for asking this naïve question.

So thank you in advance for any insight and understanding.

Lots of people are asking that question, and they're comparing Apple's buyback more and more to IBM's futile one. That said, look at what they did spend big bucks on: Beats. You sure you want them making more big acquisitions?

markpratt

Apple would make their stockholders much happier if they increased the dividends even more than buying up even more shares. The previous buy backs where at much higher prices so really a waste of capital. Dividends also reward and incentivize long term stock holders.

acgmph

amarkap said:

Hello, perhaps AppleInsider is not the best place to ask and learn about how stock buy back works but most everyone seems pretty knowledgeable (at least more than me).  So I wanted to ask.  I purchased my shares at $127.00.  Yes, it hasn't been easy to watch the share price plummet on me but I will hold onto the stock so as long as I use Apple products (which I do). 

My one question is that I always thought when companies bought back shares of their own stock that that is supposed to be good for the shareholder and the price ought to go up a little bit.  As I understood the Supply is going down so technically people ought to be paying more to own the fewer shares available.  But that doesn't seem to happen (at least not to the guy holding at $127.00).  So if it doesn't really cause the price to go up for us Shareholders why does Apple keep buying back shares?  Perhaps they can spend that money on something else?  Please don't make too much fun of me for asking this naïve question.

So thank you in advance for any insight and understanding.

Share buybacks are supposed to prop up the stock and offer investors a higher exit than they would normally get if they would let the price free on the market - it would drop a lot lower than where it is now-, hence why they include share buybacks in capital return programs.

However, looking at their dividend yield, which right now is about 2.2%, that's where I would like them to focus on. Investors can easily get 2% from CDs, so why would any new investor be interested in owning AAPL when they can place the same money in a risk free CD, than in a  volatile stock with beta at 1.3-ish, that also lost about 20% since last year? More so, share buybacks artificially prop up EPS (same revenue, but less shares), and EPS is a target when reporting results. Makes the company look better, but just artificially so.

Now, returning to the dividend policy which I hope they reconsider next quarter, if I were a new investor I would like to see a dividend yield of at least 4% (3% for e less volatile stock with small but constant growth in share price every year). So that means that if I were a new investor, stock price should be at about half of what it is now to consider an entry. Either that or increase dividends even more. They're sitting on a ton of cash which is not working capital, so they can certainly afford it for the foreseeable future. But realistically I don't see the stock halving its price considering the massive buyback announced and what a tragedy that would be for a ton of institutional and private investors alike. I'm expecting it to drop to no less than $90 a share, which is not an appealing entry point for a dividend investor. And this stock is no longer a growth stock, as sales have hit a ceiling which will be hard to overcome without new product lines or new markets (yes, they're expanding in India, but don't hold your breath on booming sales there), so I'm not expecting the share price to increase too much over the course of this year, but I am hoping for less volatility now that the company's earnings and expectations are in tune with Wall St consensus - the "Apple is doomed" consensus. 

If I were you and able to afford it, I would buy more stock when it stabilizes at its new low this week or next week to decrease your average cost per share (if you buy at $127 then buy at $90 then your average cost per share would drop) so you can see a return quicker when the share price rebounds in the future. I would not be happy with a median acquisition cost of $127 a share...

Disclaimer: Please don't buy or sell shares based on what you read in this post

artharg

Stock buybacks work two ways: it adds demand and it reduces the number of shares outstanding. The first props up share prices, the second means that there is less money to be paid out to dividends. And that in turn means that a given dividend per share is easier maintained when profits fall.

As to why Apple doesn't increase the dividend steeply: they're building a reputation as a solid company to invest in. For that, they need to be seen to raise the dividend steadily and to be able to pay dividends, not cut or skip them. Even though 2.2% is not much, compared to the interest on savings it is substantial. Apple is currently a safe company to invest in for investor (not traders). So I think the dividends will keep increasing steadily in the coming years, maybe to the 4-5% range.

There's a company in the Netherlands that is the gold standard in risk/reward: Royal Dutch Shell. It's a solid company and yields about 5%. Among Dutch investors the wisdom is: if a company yields more than Shell, pay attention. It's usually a sign that the company is in trouble and that share prices already reflect that while dividends don't, yet.

acgmph

artharg said:

Stock buybacks work two ways: it adds demand and it reduces the number of shares outstanding. The first props up share prices, the second means that there is less money to be paid out to dividends. And that in turn means that a given dividend per share is easier maintained when profits fall.

As to why Apple doesn't increase the dividend steeply: they're building a reputation as a solid company to invest in. For that, they need to be seen to raise the dividend steadily and to be able to pay dividends, not cut or skip them. Even though 2.2% is not much, compared to the interest on savings it is substantial. Apple is currently a safe company to invest in for investor (not traders). So I think the dividends will keep increasing steadily in the coming years, maybe to the 4-5% range.

There's a company in the Netherlands that is the gold standard in risk/reward: Royal Dutch Shell. It's a solid company and yields about 5%. Among Dutch investors the wisdom is: if a company yields more than Shell, pay attention. It's usually a sign that the company is in trouble and that share prices already reflect that while dividends don't, yet.

2.2% is the highest dividend Apple has ever paid. RDS-A is currently at about 7.2%... With current CD APY at 2.3% I think Apple has a long way to go to really become a dividend stock and I would like to see them become more aggressive in that area.

MacPro

launfall said:

The share price of Apple stock is a bargain right now, and Apple is wisely buying up shares on the cheap. When I bought 100 shares of Apple about 8 years ago it was at $95/share, but that was before the 6/1 split. At today's price my $9500 is worth $73,500. Apple believes, as do I, that history will repeat itself. I continue to invest my dividends in small Apple purchases of about 10 shares a year. I believe in the company because while they can sometimes be maddingly annoying and high-handed, they make a superior product that I have used since 1982. Buy what you know.

You got screwed ....  I got 7:1.  

acgmph

sog35 said:

acgmph said:

2.2% is the highest dividend Apple has ever paid. RDS-A is currently at about 7.2%... With current CD APY at 2.3% I think Apple has a long way to go to really become a dividend stock and I would like to see them become more aggressive in that area.

Show me a 1 year CD that is at 2.3%?  No such thing. The highest 1 year CD's are 1.30%.  Plus CD's are taxed at short-term gain rates.

Show me where I said a 1 year CD. A 10 year CD has a 2.3 APY. And if the CD is part of your IRA you don't pay any taxes on that interest. If you are optimistic about Apple's future, then go ahead and hold the stock. Right now I prefer the CD, Apple still needs to prove to me its not only a one hit wonder. And I say this living in an Apple-only household. 

artharg

acgmph said:

artharg said:

Stock buybacks work two ways: it adds demand and it reduces the number of shares outstanding. The first props up share prices, the second means that there is less money to be paid out to dividends. And that in turn means that a given dividend per share is easier maintained when profits fall.

As to why Apple doesn't increase the dividend steeply: they're building a reputation as a solid company to invest in. For that, they need to be seen to raise the dividend steadily and to be able to pay dividends, not cut or skip them. Even though 2.2% is not much, compared to the interest on savings it is substantial. Apple is currently a safe company to invest in for investor (not traders). So I think the dividends will keep increasing steadily in the coming years, maybe to the 4-5% range.

There's a company in the Netherlands that is the gold standard in risk/reward: Royal Dutch Shell. It's a solid company and yields about 5%. Among Dutch investors the wisdom is: if a company yields more than Shell, pay attention. It's usually a sign that the company is in trouble and that share prices already reflect that while dividends don't, yet.

2.2% is the highest dividend Apple has ever paid. RDS-A is currently at about 7.2%... With current CD APY at 2.3% I think Apple has a long way to go to really become a dividend stock and I would like to see them become more aggressive in that area.

Yeah, RDS-A yield is a bit higher than usual right now, but that actually underscores my point. Shell, as an oil company, suffers from the low oil price. People also question whether Shell, as an oil company, has a future in the light of the green revolution. I mean, we're all going to buy Teslas and plant windmills in our gardens, right? Who needs oil? So RDS-A shares have gone down 10-15% but Shell tries its damnedest to maintain dividends at the current level.

We'll see. Maybe Apple will increase dividends more aggressively. I wouldn't mind  

brucemc

gmgravytrain said:

lkrupp said:

How can apple increase dividends when they are filing for bankruptcy tomorrow?

I realize you're only being sarcastic, but truthfully, as far as Wall Street is concerned, Apple's value as an investment is worth almost nothing and they may as well be filing for bankruptcy. Wall Street is practically certain Apple has no future.

You're not far off from Apple being valued at $0 in the future, from the perspective that current stock price should reflect all future known value.  With the current shareholder return plan (buybacks and dividends) and cash generation over short period, Apple would deliver this value conservatively in under 10 years.

Of course Apple still has to execute (they can't shut down the R&D factory), but with a very loyal base (with over 1B active devices), best-in-class ecosystem, increasing services - there is no way that Apple is going to be significantly lower in revenue in 5 years timeframe.  The AAPL share price is beyond undervalued, even with results like this past quarter.

icoco3

marka said:

Apple would make their stockholders much happier if they increased the dividends even more than buying up even more shares. The previous buy backs where at much higher prices so really a waste of capital. Dividends also reward and incentivize long term stock holders.

The buyback will be more fully felt 10 years from now.  It is a long term investment.

Buying back at different prices is the basis of dollar cost averaging.  Same works for those who invest in the stock.

174

icoco3

acgmph said:

sog35 said:

Show me a 1 year CD that is at 2.3%?  No such thing. The highest 1 year CD's are 1.30%.  Plus CD's are taxed at short-term gain rates.

...Apple still needs to prove to me its not only a one hit wonder. And I say this living in an Apple-only household. 

One hit wonder?  Apple, since April 1, 1976 and still going strong. How long do you need????

10 years of Apple...

May 1, 2006    $8.54
April 27, 2016 $98.47 (current as of this post)

That is about a 1,053% increase.  What were you saying about those CD's?

applejakes

icoco3 said:

marka said:

Apple would make their stockholders much happier if they increased the dividends even more than buying up even more shares. The previous buy backs where at much higher prices so really a waste of capital. Dividends also reward and incentivize long term stock holders.

The buyback will be more fully felt 10 years from now.  It is a long term investment.

Buying back at different different prices is the basis of dollar cost averaging.  Same works for those who invest in the stock.

Thank you for a voice of reason.

Apple has retired around 1.2 billion shares over the last 3 years.  If prices remain depressed then imagine how many they can retire over the next 10 years.  Then we are looking at a company with 1 billion or less outstanding shares in 10-15 years. Prices will rise over that time period and the cash in the bank will come in handy in helping us get to that point.  I envision having less than 500 million shares outstanding.

Everyone can do their own math on EPS and P/E but I can promise you will like it if we get to that point.

yojimbo007

amarkap said:

Hello, perhaps AppleInsider is not the best place to ask and learn about how stock buy back works but most everyone seems pretty knowledgeable (at least more than me).  So I wanted to ask.  I purchased my shares at $127.00.  Yes, it hasn't been easy to watch the share price plummet on me but I will hold onto the stock so as long as I use Apple products (which I do). 

My one question is that I always thought when companies bought back shares of their own stock that that is supposed to be good for the shareholder and the price ought to go up a little bit.  As I understood the Supply is going down so technically people ought to be paying more to own the fewer shares available.  But that doesn't seem to happen (at least not to the guy holding at $127.00).  So if it doesn't really cause the price to go up for us Shareholders why does Apple keep buying back shares?  Perhaps they can spend that money on something else?  Please don't make too much fun of me for asking this naïve question.

So thank you in advance for any insight and understanding.

Not naive at all.... Since apple has started their share buyback... 100 billion plus so far.. I have lost net od 500k in my Apple stock value. And i have written in many forums and communicated this to some Apple executives. "How have you paid me back ? Besides dividents!" To this day no one has given me a answer .. Ps.. Yes we all knows it reduces the float... And increases the eps... Its not rocket science. But So what! .....if all that is being obsorbed by the shrinking PE..... Where and when will i see this return.. Or is this money in up in smoke. What would have happened if apple did not do the buyback.? Stock would have been 80 dollars? I am bewildered myself... So are many many out there. Yet apple increased its by back initiative to 250 billion. When they annonced buy back first time... It gave me massive confidance. This time.... I see it as a signal that apple execs expect weakness in their stock for the foreseeable future ..year or more. And they dont want to miss the opertunity to back up the truck and load some more cheap stocks. To what avail? ........So far none of shareholders can see, smell, or touch any benifit from it.

SpamSandwich

marka said:

Apple would make their stockholders much happier if they increased the dividends even more than buying up even more shares. The previous buy backs where at much higher prices so really a waste of capital. Dividends also reward and incentivize long term stock holders.

I disagree. Dividends encourage the "big boys" on Wall Street to pump and dump even more than before. All they need to do is buy before the restricted cutoff date, then sell once they scrape off their dividends. The stock should be growing fast enough to provide value to the shareholders, if it's not (and it hasn't been recently) then Apple should change their strategies to increase growth. Incidentally, one way to increase value is by spinning off parts of the company to have them operate as independent business units. Yes, the stock market is a game, but Amazon (damn them to hell) just plays the game better.