Raise in Apple's dividend and $35B share buyback program extension predicted

Posted:
in AAPL Investors edited April 23
Apple will be accelerating how it passes some of its giant cash hoard to investors, according to analysts at Wells Fargo, with the iPhone producer expected to offer a dividend increase and raise how many shares it buys back, though not by as much as it has in previous years




Apple is set to announce its quarterly earnings for the second fiscal quarter of 2019 on April 30, and analysts are speculating on what could be announced in the filing and the following conference call with company executives. In the view of Wells Fargo, Apple will be providing more cash to investors from the significant sum it repatriated to the United States.

In a note to investors seen by AppleInsider, Wells Fargo analyst Aaron Rakers believes Apple will provide an update to its capital return program, as it has done for the last seven years. After repurchasing $48.68 billion in stock and paying out $10.75 billion in dividends, Apple's net cash is thought to be around $129.6 billion at the end of the quarter.

For 2019, it is thought the share repurchase authorization will be around $35 billion. While considerable to most companies, this is relatively low compared to 2018, where Apple authorized buybacks worth $100 billion, but it is similar in size to those offered in 2016 and 2017.

Using historical data, Wells Fargo also anticipates an increase in share dividend of around 10%.

Citing a "struggle to look past" weak iPhone demand data points, Wells Fargo offers a cautious stance for the quarterly results, reducing its estimates to $56.6 billion in revenue from $58.3 billion, and an earnings per share of $2.38, down from $2.45. The firm maintains a "perform" rating for Apple's shares, and a price target of $190.
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Comments

  • Reply 1 of 31
    MacProMacPro Posts: 18,166member
    AAPL the gift that keeps giving.  We've had all the dividends automatically buy more AAPL for the last 15 years.
    lkruppSpamSandwich
  • Reply 2 of 31
    GeorgeBMacGeorgeBMac Posts: 4,299member
    Huawei attributes its success to re-investing its profits in the company and its R&D instead passing out treats of dividends and buy-backs.

    That's pretty much how most American companies did it back in the day when American industry was growing instead of shrinking.

  • Reply 3 of 31
    lkrupplkrupp Posts: 6,956member
    MacPro said:
    AAPL the gift that keeps giving.  We've had all the dividends automatically buy more AAPL for the last 15 years.
    I insisted that my financial advisor buy some AAPL for one of my IRA’s. It has worked out pretty well so far.
    jeffythequick
  • Reply 4 of 31
    davidwdavidw Posts: 967member
    MacPro said:
    AAPL the gift that keeps giving.  We've had all the dividends automatically buy more AAPL for the last 15 years.
    You must be one shrew investor, since Apple has only been paying a regular dividend since Aug. of 2012. That's just about 7 years ago. I wish I could have collected 15 years of AAPL dividend since then.

    Kidding aside, I choose to get the cash. Since it's taxable either way and my portfolio is already too heavily weighed by AAPL. I do not need to add any more shares of AAPL. Now if they didn't tax dividend used to buy more shares, I would jump at that in an instant.
    edited April 23 space2001
  • Reply 5 of 31
    1st1st Posts: 343member
    hmm, extra meat on my t-bone steak.  yammy.  Hopefully, they bought back stock at 150-160 range a lot.  However, 5G will cost a lot of dough, the carrier might need some handout (if not hand held) to get out of woods upon launch. Better save some for the raining days (i can live with trim off sirloin).  
  • Reply 6 of 31
    knowitallknowitall Posts: 1,284member
    Burning money does not return money to shareholders, it just makes it disappear.
  • Reply 7 of 31
    sacto joesacto joe Posts: 728member
    knowitall said:
    Burning money does not return money to shareholders, it just makes it disappear.
    (Sigh. So much ignorance, so little time.)

    Buybacks are not the same as burning money. Every quarter, Apple reports the outstanding share count, at last report down almost 2 B shares from it’s peak to about 4.7 B. A share represents a percentage of ownership of Apple. Ergo, removing shares increases the percentage ownership of each remaining share.

    Think if them as slices of Apple pie. Note that, with massive buybacks, even if the pie stopped growing (it hasn’t), the size of each slice would still increase. If Apple bought back all but one share, the holder of that one share would own 100% of a company that earns a net profit of more than $50 B/year.

    And then there’s the ice cream on the top of the Apple pie: When Apple is undervalued, as it continually has been since the Great Recession, then Apple is able to buy back it’s stock on the cheap. Because of that increased buyback per buck spent, these shares represent an incredible value to the long term investor.

    Why is Apple undervalued? Because for a decade now, folks have been doubting Apple’s ability to keep growing (remember the “law of large numbers” nonsense?).

    Oh, and finally, the value Apple gives back to the investor with buybacks isn’t taxed. Dividends are.

    Hopefully, this dispels the misconception that Apple’s buyback is some kind of gimmick. Take it from this well-rewarded long term investor; it isn’t a gimmick. It’s the real deal.
    edited April 23
  • Reply 8 of 31
    davidwdavidw Posts: 967member
    sacto joe said:
    knowitall said:
    Burning money does not return money to shareholders, it just makes it disappear.
    (Sigh. So much ignorance, so little time.)

    Buybacks are not the same as burning money. Every quarter, Apple reports the outstanding share count, at last report down almost 2 B shares from it’s peak to about 4.7 B. A share represents a percentage of ownership of Apple. Ergo, removing shares increases the percentage ownership of each remaining share.

    Think if them as slices of Apple pie. Note that, with massive buybacks, even if the pie stopped growing (it hasn’t), the size of each slice would still increase. If Apple bought back all but one share, the holder of that one share would own 100% of a company that earns a net profit of more than $50 B/year.

    And then there’s the ice cream on the top of the Apple pie: When Apple is undervalued, as it continually has been since the Great Recession, then Apple is able to buy back it’s stock on the cheap. Because of that increased buyback per buck spent, these shares represent an incredible value to the long term investor.

    Why is Apple undervalued? Because for a decade now, folks have been doubting Apple’s ability to keep growing (remember the “law of large numbers” nonsense?).

    Oh, and finally, the value Apple gives back to the investor with buybacks isn’t taxed. Dividends are.

    Hopefully, this dispels the misconception that Apple’s buyback is some kind of gimmick. Take it from this well-rewarded long term investor; it isn’t a gimmick. It’s the real deal.
    https://finance.yahoo.com/news/warren-buffett-defends-stock-buybacks-144528493.html

    >>Simply put, buybacks allow companies to distribute money to the shareholders. Another way of doing that is through dividends.

    “And presumably, American business should distribute money to its owners, occasionally. And we do it through buybacks. We've done some. And we don't do it through dividends. But most companies do it through having a dividend policy.”

    The bottom line is if companies have met the needs of the business and the stock is underpriced then buybacks make “nothing but sense,” Buffett said.<<



    As a long term investor in AAPL, if it's good enough for Warren, it good enough for me. 

    edited April 23 sacto joe
  • Reply 9 of 31
    crowleycrowley Posts: 5,799member
    sacto joe said:

    If Apple bought back all but one share, the holder of that one share would own 100% of a company that earns a net profit of more than $50 B/year.
    And has a debt of $800bn.

    Buybacks are not of any value to shareholders unless the value per share of the company subsequently rises, either because the company was previously undervalued or because it it improves its profit position.  If the stock price goes down then the buyback has very much burnt money.

    I think Apple are probably right to be confident in their future, but it’s not a black and white option like some make it out as.
  • Reply 10 of 31
    Not much of a leap to assume there will be larger dividends and buybacks. Didn’t they say on their last conference call that they wanted to reduce the cash stockpile close to zero and would be sharing details about how they would do this on the next conference call? I think a 10% increase in dividends is the absolute minimum I would expect. 
    edited April 23
  • Reply 11 of 31
    davidwdavidw Posts: 967member
    Speaking of buybacks, I just notice that AAPL is now a little above $207 a share and it's market cap is about $977M. Wasn't Apple market cap at about $1T at this point last year when AAPL was at $207? I remember many thinking Apple would be at the $1T mark at $200 a share but if turned out to be slightly above that. This may indicate just how much Apple bought back in shares since last year. Maybe I'm mistaken, because of what AAPL roller coaster ride had on my nerves.  
    sacto joe
  • Reply 12 of 31
    SpamSandwichSpamSandwich Posts: 31,007member
    Not much of a leap to assume there will be larger dividends and buybacks. Didn’t they say on their last conference call that they wanted to reduce the cash stockpile close to zero and would be sharing details about how they would do this on the next conference call? I think a 10% increase in dividends is the absolute minimum I would expect. 
    For a company the size of Apple, I find their use of cash quite uncreative. Surely there are better things they could be doing with that money, such as buying up land and leasing it back to cellular companies, or buying up a small but well-designed mesh router company, or investing in an actual electric vehicle company, like Rivian?
  • Reply 13 of 31
    sacto joesacto joe Posts: 728member
    crowley said:
    sacto joe said:

    If Apple bought back all but one share, the holder of that one share would own 100% of a company that earns a net profit of more than $50 B/year.
    And has a debt of $800bn.

    Buybacks are not of any value to shareholders unless the value per share of the company subsequently rises, either because the company was previously undervalued or because it it improves its profit position.  If the stock price goes down then the buyback has very much burnt money.

    I think Apple are probably right to be confident in their future, but it’s not a black and white option like some make it out as.
    Wow. Way to miss the point that I was exaggerating to make. It’s rather obvious that Apple isn’t going to reduce share count to 1....

    And it’s also obvious that Apple is using cash to buy back it’s stock. Which makes your debt argument specious.

    Or don’t the words “cash neutral” make sense to you?
  • Reply 14 of 31
    davidw said:
    Speaking of buybacks, I just notice that AAPL is now a little above $207 a share and it's market cap is about $977M. Wasn't Apple market cap at about $1T at this point last year when AAPL was at $207? I remember many thinking Apple would be at the $1T mark at $200 a share but if turned out to be slightly above that. This may indicate just how much Apple bought back in shares since last year. Maybe I'm mistaken, because of what AAPL roller coaster ride had on my nerves.  
    Good catch, David! The bottom line is that for Apple to get to $1 T market cap with fewer shares, the price per share has to go up. And that’s precisely the point up above that I’m trying to get people to understand. If a company is worth, say, $1 T, and the number of shares are reduced, say by 10%, then the price per share has to go up. If there were ten AAPL shares and now there are nine, then each share went from $100 B/share to ($1 T/9=) $111.1 B/share.

    Folks will yowl, of course, that Apple isn’t worth a market cap of $1 T. Fine. Pick a figure it is worth. All things being equal, if 10% of the outstanding shares are bought back, then the value of each remaining share goes up 11.1%.
    edited April 23
  • Reply 15 of 31
    Not much of a leap to assume there will be larger dividends and buybacks. Didn’t they say on their last conference call that they wanted to reduce the cash stockpile close to zero and would be sharing details about how they would do this on the next conference call? I think a 10% increase in dividends is the absolute minimum I would expect. 
    For a company the size of Apple, I find their use of cash quite uncreative. Surely there are better things they could be doing with that money, such as buying up land and leasing it back to cellular companies, or buying up a small but well-designed mesh router company, or investing in an actual electric vehicle company, like Rivian?
    Apple is constantly buying up companies, talent, and intellectual property. But it’s far more important that Apple stick to it’s knitting than spend time, money and talent in an attempt to create yet another giant conglomerate just for the sake of making a few folks happy who just want to get rich quicker.
  • Reply 16 of 31
    crowleycrowley Posts: 5,799member
    sacto joe said:
    crowley said:
    sacto joe said:

    If Apple bought back all but one share, the holder of that one share would own 100% of a company that earns a net profit of more than $50 B/year.
    And has a debt of $800bn.

    Buybacks are not of any value to shareholders unless the value per share of the company subsequently rises, either because the company was previously undervalued or because it it improves its profit position.  If the stock price goes down then the buyback has very much burnt money.

    I think Apple are probably right to be confident in their future, but it’s not a black and white option like some make it out as.
    Wow. Way to miss the point that I was exaggerating to make. It’s rather obvious that Apple isn’t going to reduce share count to 1....

    And it’s also obvious that Apple is using cash to buy back it’s stock. Which makes your debt argument specious.

    Or don’t the words “cash neutral” make sense to you?
    I got your point, you apparently didn't get mine.  You said "Think if them as slices of Apple pie. Note that, with massive buybacks, even if the pie stopped growing (it hasn’t), the size of each slice would still increase" which fails to mention that since you're spending money or accumulating debt to fund the buyback, then all other things being equal, the pie will get smaller (note that all other things are not equal, and Apple is overall growing, but the buyback is not causing that, quite the opposite).  Bigger slices of a smaller pie that amount to the same volume, effectively neutral.  Your exaggeration (for the benefit of the ignorant?  Not a good approach) gave the distinct impression that you believe Apple could (irrespective of whether it would) buy back all but one share, and the remaining shareholder would own a $1 trillion company.  Needless to say, that's nonsense, both in its exaggerated form, and what it practically would imply for the buyback.

    You didn't use the words "cash neutral" in your original post.  If you had then maybe I'd have believed you had a clue what you were talking about.

    And Apple are definitely using debt to fund a large part of the buyback (even if they aren't targetting one remaining share), it's been very widely reported on, so you can take your "specious" argument and do what feels natural with it.
    edited April 23
  • Reply 17 of 31
    crowley said:
    sacto joe said:
    crowley said:
    sacto joe said:

    If Apple bought back all but one share, the holder of that one share would own 100% of a company that earns a net profit of more than $50 B/year.
    And has a debt of $800bn.

    Buybacks are not of any value to shareholders unless the value per share of the company subsequently rises, either because the company was previously undervalued or because it it improves its profit position.  If the stock price goes down then the buyback has very much burnt money.

    I think Apple are probably right to be confident in their future, but it’s not a black and white option like some make it out as.
    Wow. Way to miss the point that I was exaggerating to make. It’s rather obvious that Apple isn’t going to reduce share count to 1....

    And it’s also obvious that Apple is using cash to buy back it’s stock. Which makes your debt argument specious.

    Or don’t the words “cash neutral” make sense to you?
    I got your point, you apparently didn't get mine.  You said "Think if them as slices of Apple pie. Note that, with massive buybacks, even if the pie stopped growing (it hasn’t), the size of each slice would still increase" which fails to mention that since you're spending money or accumulating debt to fund the buyback, then all other things being equal, the pie will get smaller (note that all other things are not equal, and Apple is overall growing, but the buyback is not causing that, quite the opposite).  Bigger slices of a smaller pie that amount to the same volume, effectively neutral.  Your exaggeration (for the benefit of the ignorant?  Not a good approach) gave the distinct impression that you believe Apple could (irrespective of whether it would) buy back all but one share, and the remaining shareholder would own a $1 trillion company.  Needless to say, that's nonsense, both in its exaggerated form, and what it practically would imply for the buyback.

    You didn't use the words "cash neutral" in your original post.  If you had then maybe I'd have believed you had a clue what you were talking about.

    And Apple are definitely using debt to fund a large part of the buyback (even if they aren't targetting one remaining share), it's been very widely reported on, so you can take your "specious" argument and do what feels natural with it.
    It’s not completely inconceivable that someone could float a loan for $1 T less Apple’s cash and gain ownership of Apple. Sure, they’d have debt, but the present net income would more than handle all that and allow the principle to be paid off over time. And that assumes Apple doesn’t grow. At the end of which pay back, they’d own Apple free and clear.

    And Apple USED debt to buy back the stock. Past tense. And always had more than enough cash to cover that debt. Hence the effort required just to reach cash neutral. Oh, and that acquired debt was at an extremely low interest rate.

    Try not assuming that other folks don’t know what they’re talking about next time.

    One other point: You said “...fails to mention that since you're spending money or accumulating debt to fund the buyback, then all other things being equal, the pie will get smaller...”. That would be true if the market gave any value to Apple’s cash. They don’t, which you should know. In fact, buybacks are a very clever way to force the market to acknowledge that cash!


    edited April 23
  • Reply 18 of 31
    1st1st Posts: 343member
    debt, use it properly can be tax beneficial - Isn't POTUS use it "effectively" and claim he is very smart?
  • Reply 19 of 31
    flydogflydog Posts: 261member
    Huawei attributes its success to re-investing its profits in the company and its R&D instead passing out treats of dividends and buy-backs.

    That's pretty much how most American companies did it back in the day when American industry was growing instead of shrinking.

    Apple seems to be doing just fine with their current strategy. But I’m sure the board appreciates your suggestion. 
  • Reply 20 of 31
    flydogflydog Posts: 261member

    Not much of a leap to assume there will be larger dividends and buybacks. Didn’t they say on their last conference call that they wanted to reduce the cash stockpile close to zero and would be sharing details about how they would do this on the next conference call? I think a 10% increase in dividends is the absolute minimum I would expect. 
    For a company the size of Apple, I find their use of cash quite uncreative. Surely there are better things they could be doing with that money, such as buying up land and leasing it back to cellular companies, or buying up a small but well-designed mesh router company, or investing in an actual electric vehicle company, like Rivian?
    None of those things would increase shareholder value. And most would be not much different than throwing the money into the ocean 
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