After the lackluster buyback last quarter I expect Apple to have spent $20 billion or more on the buyback this quarter and to have taken around 125 million shares off the table which increases our ownership by 2.6%.
Unless they are stockpiling cash for a huge buy. Not stock of course.
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.
Your right, I worded that badly. We've had the shares many years and had the dividends repurchase since they started and to be honest I couldn't remember when that was, it was a wild guess. Yes we take the dividends from our regular investments but not the IRAs which are heavly in Apple too. I bought orginally in 05 at $7 and another load in 08 when we sold a few investment properties just before the real estate crash, I think AAPL was about $12 at ther time.
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.
Treats? Companies should, at some point, return capital to investors. The owners of the companies should get the profits which those companies make. If you own a rental house, you should get the profits that come from it. If you own a restaurant, you should get the profits that come from it. That's much the point of owning a company (at least, of owning a company you didn't found and don't work for yourself). If companies weren't going to, at some point, return profits to shareholders, why would people invest money in companies? And if no one invested money in (equity) companies, that would not be good. It would, for one thing, greatly inhibit economic opportunity for those who don't already have a lot of money.
That said, Huawei doesn't reinvest profits. If it reinvested them, they wouldn't be profits. And it's profitable from year to year, so in year 2 it isn't reinvesting profits from year 1 in R&D - R&D is just an expense that comes out of its ongoing revenues.
It would be fair, I think, to say that it reinvests would-be profits in R&D. In other words, it spends money on R&D. But so does Apple and so do most large companies. The profits which Apple returns to shareholders is part of what's leftover after it spends all the money on R&D which it thinks makes sense. It isn't reducing its R&D spending so that it can return money to shareholders. Its R&D spending has continued to increase even as it has been returning money to shareholders.
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.
That's right, buybacks don't always add shareholder value and, of course, aren't always a good decision from the company's perspective. What they do is concentrate future stock price moves.
That said, Apple's share repurchases have almost certainly added shareholder value. To believe otherwise we'd have to believe that Apple's market cap would be around $1.4 trillion if it hadn't done the repurchases and it still held that money - around $250 billion. Based on yesterday's closing price it's about $190 billion ahead, so to speak, on its share repurchases. And if for some reason it needed money, it could in theory re-issue and sell shares (at an effective profit) to get it.
But, as you suggest, the results of share repurchases can be very different. We can look at Qualcomm to see both sides of the coin. In the last year Qualcomm has spent a boatload of money buying back a huge portion of its outstanding equity. If we'd considered a couple of months ago whether that had been a good idea, I think we might have concluded that it had not been. Those repurchases were significantly underwater before the recent dramatic price appreciation. But now, those repurchases look quite smart (though far from perfect timing wise). Qualcomm is quite a bit ahead on those repurchases. Its market cap still isn't as high as it was in 2014, or as it high as it was as recently as late 2018, but its share price is higher than its been since 2000. Shareholders have benefited greatly from the settlement news, but they've also benefited from Qualcomm recently buying back shares in the $60s
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.
That's kinda what the American Steel industry said back in the 60's when they were king of world and thought they were invincible -- so they squandered their money instead of reinvesting it. It didn't end well.
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.
Your right, I worded that badly. We've had the shares many years and had the dividends repurchase since they started and to be honest I couldn't remember when that was, it was a wild guess. Yes we take the dividends from our regular investments but not the IRAs which are heavly in Apple too. I bought orginally in 05 at $7 and another load in 08 when we sold a few investment properties just before the real estate crash, I think AAPL was about $12 at ther time.
Are you aware of the "IRA dividend tax trap" with tradition IRA's? With a Roth IRA, it's a no brainer to reinvest dividend, as all withdrawal after the age of 59 1/2 will not be taxed. However, with a tradition IRA, all withdrawal are taxed as regular income after 59 1/2 and retired. What this means is that the 15% long term capital gains tax does not applied to dividends earned inside a traditional IRA. Where you are only taxed 15% on dividends earn outside a traditional IRA, you will be taxed at your highest marginal tax rate at time you withdraw the dividends, earned inside a traditional IRA.
You really don't have a choice in the matter as all withdrawal from your traditional IRA is taxed as regular income because none of the money was taxed going in. So you might end up paying 25% tax or more, on those dividends. Where you are only paying 15% capital gains tax on dividends you earn outside your IRA. So long as the AAPL shares you bought with the dividend inside a traditional IRA goes up by 10% or so, you'll be ahead, tax wise. Providing your marginal tax bracket isn't 32% and above, at the time of withdrawal.
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.
Treats? Companies should, at some point, return capital to investors. The owners of the companies should get the profits which those companies make. If you own a rental house, you should get the profits that come from it. If you own a restaurant, you should get the profits that come from it. That's much the point of owning a company (at least, of owning a company you didn't found and don't work for yourself). If companies weren't going to, at some point, return profits to shareholders, why would people invest money in companies? And if no one invested money in (equity) companies, that would not be good. It would, for one thing, greatly inhibit economic opportunity for those who don't already have a lot of money.
That said, Huawei doesn't reinvest profits. If it reinvested them, they wouldn't be profits. And it's profitable from year to year, so in year 2 it isn't reinvesting profits from year 1 in R&D - R&D is just an expense that comes out of its ongoing revenues.
It would be fair, I think, to say that it reinvests would-be profits in R&D. In other words, it spends money on R&D. But so does Apple and so do most large companies. The profits which Apple returns to shareholders is part of what's leftover after it spends all the money on R&D which it thinks makes sense. It isn't reducing its R&D spending so that it can return money to shareholders. Its R&D spending has continued to increase even as it has been returning money to shareholders.
From a stock market point of view there have, traditionally, been two types of companies: Growth where stockhoders gained from company growth -- with little or no dividends or buybacks -- because the company was growing and the profits were reinvested in order to support that growth. Dividend payers: Which were mostly mature, stagnant operations like utilities who had little prospect of growing the business so they returned their profits to stockholders instead of reinvesting them.
But today, since American industry is not growing and is controlled by financial interests rather than those interested in growing the business, many companies choose to hand out treats to their financial interests rather than investing the their company's future. (I think Apple, after being raided by Carl Icahn is trying to balance both.)
As for your statements on Huawei not investing profits because then they wouldn't then be profits: I don't think you understand the difference between profit and retained earnings. When a company turns a profit (revenue exceeds expenses) they have two options: Let it ride by booking it to "retained earnings" (and thus reinvesting it into the company) or passing those profits out to share holders in the form or dividends and buybacks.
Huawei knows that, to keep growing, they need to reinvest their profits back into themselves in order to grow and strengthen the company.
Added: Your namesake knew that well, lived rather frugally (as did his partner Frick) and reinvested his profits back into his organization -- which is why it grew to such an immense size.
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.
Treats? Companies should, at some point, return capital to investors. The owners of the companies should get the profits which those companies make. If you own a rental house, you should get the profits that come from it. If you own a restaurant, you should get the profits that come from it. That's much the point of owning a company (at least, of owning a company you didn't found and don't work for yourself). If companies weren't going to, at some point, return profits to shareholders, why would people invest money in companies? And if no one invested money in (equity) companies, that would not be good. It would, for one thing, greatly inhibit economic opportunity for those who don't already have a lot of money.
That said, Huawei doesn't reinvest profits. If it reinvested them, they wouldn't be profits. And it's profitable from year to year, so in year 2 it isn't reinvesting profits from year 1 in R&D - R&D is just an expense that comes out of its ongoing revenues.
It would be fair, I think, to say that it reinvests would-be profits in R&D. In other words, it spends money on R&D. But so does Apple and so do most large companies. The profits which Apple returns to shareholders is part of what's leftover after it spends all the money on R&D which it thinks makes sense. It isn't reducing its R&D spending so that it can return money to shareholders. Its R&D spending has continued to increase even as it has been returning money to shareholders.
From a stock market point of view there have, traditionally, been two types of companies: Growth where stockhoders gained from company growth -- with little or no dividends or buybacks -- because the company was growing and the profits were reinvested in order to support that growth. Dividend payers: Which were mostly mature, stagnant operations like utilities who had little prospect of growing the business so they returned their profits to stockholders instead of reinvesting them.
But today, since American industry is not growing and is controlled by financial interests rather than those interested in growing the business, many companies choose to hand out treats to their financial interests rather than investing the their company's future. (I think Apple, after being raided by Carl Icahn is trying to balance both.)
As for your statements on Huawei not investing profits because then they wouldn't then be profits: I don't think you understand the difference between profit and retained earnings. When a company turns a profit (revenue exceeds expenses) they have two options: Let it ride by booking it to "retained earnings" (and thus reinvesting it into the company) or passing those profits out to share holders in the form or dividends and buybacks.
Huawei knows that, to keep growing, they need to reinvest their profits back into themselves in order to grow and strengthen the company.
Added: Your namesake knew that well, lived rather frugally (as did his partner Frick) and reinvested his profits back into his organization -- which is why it grew to such an immense size.
I understand the different kinds of companies (as being, e.g., growth, dividend, or hybrid) which investors look for. And I understand what retained earnings are.
The point is, whatever profits Apple makes is what's left over after it spends what it think makes sense to spend. And whatever cash it has is what's left over after it reinvests whatever it thinks makes sense to reinvest. The same is true for Huawei. Apple isn't not investing more money in, e.g., R&D because it is returning that money to investors.
Should a company spend more money than it thinks makes sense to spend just because it has that money? Why did you buy by that company? Because we had the money to do so. Why did you build that building? Because we had the money to do so. Why did you hire 20,000 more people? Because we had the money to do so. No, that would be terrible business practice. A company should only spend the money that it thinks makes sense to spend on, e.g. R&D. It shouldn't spend money in ways it doesn't think are productive just because it has money to spend.
For a long time Apple accumulated extra cash. That was what was left after it did everything it wanted to do - everything it thought it should do. At some point it had so much cash, it no longer made sense to let it just pile up. So it started returning capital to shareholders. I'm generally not a fan of returning capital to shareholders myself. It's contrary to what I see as the point, for my purposes, of equity investing. But even I recognize that at some point, if a company has been making a lot of money and doesn't see a productive use for that money, it should return it to shareholders.
If companies never returned capital to investors, there'd be no reason for most people to invest money in companies. Even a growth company is only seen as an attractive investment because, at some point - perhaps a long time down the road, it might start returning money to investors. As it is one can make money by selling stock to someone else at a higher price than they paid for it. But somewhere at the end of that chain - in order for stock prices to rise - there has to be the anticipation that the company will return capital to shareholders (or, e.g., be bought or liquidated). Otherwise, there's no reason for its stock price to rise.
I'd note that Huawei now has a pretty decent net cash position - around $30 billion. That's equivalent to more than 3 years worth of profits. It isn't distributing that cash to shareholders, but neither is it reinvesting that cash. It's sitting there, accumulating - much as was the case with Apple a couple years before it started returning money to shareholders. As Huawei's profitability has increased, its net cash position has increased. It's just not as far along in that cycle as Apple was when it started returning money to shareholders.
All that said, if for some reason Apple needed cash - if it, e.g., found something it thought made sense to spend a lot of cash on - it could raise cash by issuing and selling more stock. It could start selling shares back into the market. If it sold a lot of shares in a short period of time, that might suppress the share price some. But, at the current stock price, it has plenty of margin to come out ahead on its buybacks. It would then have all the money in the world to spend again, and would have added a few years worth of additional profit from its investing activities (i.e. buying and retiring, and then issuing and selling, its own shares).
But it likely won't need to do that, because it makes so much money. It has plenty of money to invest in R&D or other things. Its capital return program doesn't limit what it reinvests in its business. What it thinks makes good business sense does. The same is true for Huawei, which is why it hasn't been reinvesting all of its profits back in its business either.
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.
Your stating the obvious. Share value is completely volatile and has no relation to the actual value of the company, its a gamblers playground. So with 1 share left and ‘owning’ 100% of the company boils down to owning a share possibly valued $0, so you own nothing ...
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Unless they are stockpiling cash for a huge buy. Not stock of course.
That said, Huawei doesn't reinvest profits. If it reinvested them, they wouldn't be profits. And it's profitable from year to year, so in year 2 it isn't reinvesting profits from year 1 in R&D - R&D is just an expense that comes out of its ongoing revenues.
It would be fair, I think, to say that it reinvests would-be profits in R&D. In other words, it spends money on R&D. But so does Apple and so do most large companies. The profits which Apple returns to shareholders is part of what's leftover after it spends all the money on R&D which it thinks makes sense. It isn't reducing its R&D spending so that it can return money to shareholders. Its R&D spending has continued to increase even as it has been returning money to shareholders.
Sure. But what does burning money have to do with this thread?
That's right, buybacks don't always add shareholder value and, of course, aren't always a good decision from the company's perspective. What they do is concentrate future stock price moves.
That said, Apple's share repurchases have almost certainly added shareholder value. To believe otherwise we'd have to believe that Apple's market cap would be around $1.4 trillion if it hadn't done the repurchases and it still held that money - around $250 billion. Based on yesterday's closing price it's about $190 billion ahead, so to speak, on its share repurchases. And if for some reason it needed money, it could in theory re-issue and sell shares (at an effective profit) to get it.
But, as you suggest, the results of share repurchases can be very different. We can look at Qualcomm to see both sides of the coin. In the last year Qualcomm has spent a boatload of money buying back a huge portion of its outstanding equity. If we'd considered a couple of months ago whether that had been a good idea, I think we might have concluded that it had not been. Those repurchases were significantly underwater before the recent dramatic price appreciation. But now, those repurchases look quite smart (though far from perfect timing wise). Qualcomm is quite a bit ahead on those repurchases. Its market cap still isn't as high as it was in 2014, or as it high as it was as recently as late 2018, but its share price is higher than its been since 2000. Shareholders have benefited greatly from the settlement news, but they've also benefited from Qualcomm recently buying back shares in the $60s
You really don't have a choice in the matter as all withdrawal from your traditional IRA is taxed as regular income because none of the money was taxed going in. So you might end up paying 25% tax or more, on those dividends. Where you are only paying 15% capital gains tax on dividends you earn outside your IRA. So long as the AAPL shares you bought with the dividend inside a traditional IRA goes up by 10% or so, you'll be ahead, tax wise. Providing your marginal tax bracket isn't 32% and above, at the time of withdrawal.
Growth where stockhoders gained from company growth -- with little or no dividends or buybacks -- because the company was growing and the profits were reinvested in order to support that growth.
Dividend payers: Which were mostly mature, stagnant operations like utilities who had little prospect of growing the business so they returned their profits to stockholders instead of reinvesting them.
But today, since American industry is not growing and is controlled by financial interests rather than those interested in growing the business, many companies choose to hand out treats to their financial interests rather than investing the their company's future. (I think Apple, after being raided by Carl Icahn is trying to balance both.)
As for your statements on Huawei not investing profits because then they wouldn't then be profits: I don't think you understand the difference between profit and retained earnings. When a company turns a profit (revenue exceeds expenses) they have two options: Let it ride by booking it to "retained earnings" (and thus reinvesting it into the company) or passing those profits out to share holders in the form or dividends and buybacks.
Huawei knows that, to keep growing, they need to reinvest their profits back into themselves in order to grow and strengthen the company.
Added: Your namesake knew that well, lived rather frugally (as did his partner Frick) and reinvested his profits back into his organization -- which is why it grew to such an immense size.
The point is, whatever profits Apple makes is what's left over after it spends what it think makes sense to spend. And whatever cash it has is what's left over after it reinvests whatever it thinks makes sense to reinvest. The same is true for Huawei. Apple isn't not investing more money in, e.g., R&D because it is returning that money to investors.
Should a company spend more money than it thinks makes sense to spend just because it has that money? Why did you buy by that company? Because we had the money to do so. Why did you build that building? Because we had the money to do so. Why did you hire 20,000 more people? Because we had the money to do so. No, that would be terrible business practice. A company should only spend the money that it thinks makes sense to spend on, e.g. R&D. It shouldn't spend money in ways it doesn't think are productive just because it has money to spend.
For a long time Apple accumulated extra cash. That was what was left after it did everything it wanted to do - everything it thought it should do. At some point it had so much cash, it no longer made sense to let it just pile up. So it started returning capital to shareholders. I'm generally not a fan of returning capital to shareholders myself. It's contrary to what I see as the point, for my purposes, of equity investing. But even I recognize that at some point, if a company has been making a lot of money and doesn't see a productive use for that money, it should return it to shareholders.
If companies never returned capital to investors, there'd be no reason for most people to invest money in companies. Even a growth company is only seen as an attractive investment because, at some point - perhaps a long time down the road, it might start returning money to investors. As it is one can make money by selling stock to someone else at a higher price than they paid for it. But somewhere at the end of that chain - in order for stock prices to rise - there has to be the anticipation that the company will return capital to shareholders (or, e.g., be bought or liquidated). Otherwise, there's no reason for its stock price to rise.
I'd note that Huawei now has a pretty decent net cash position - around $30 billion. That's equivalent to more than 3 years worth of profits. It isn't distributing that cash to shareholders, but neither is it reinvesting that cash. It's sitting there, accumulating - much as was the case with Apple a couple years before it started returning money to shareholders. As Huawei's profitability has increased, its net cash position has increased. It's just not as far along in that cycle as Apple was when it started returning money to shareholders.
All that said, if for some reason Apple needed cash - if it, e.g., found something it thought made sense to spend a lot of cash on - it could raise cash by issuing and selling more stock. It could start selling shares back into the market. If it sold a lot of shares in a short period of time, that might suppress the share price some. But, at the current stock price, it has plenty of margin to come out ahead on its buybacks. It would then have all the money in the world to spend again, and would have added a few years worth of additional profit from its investing activities (i.e. buying and retiring, and then issuing and selling, its own shares).
But it likely won't need to do that, because it makes so much money. It has plenty of money to invest in R&D or other things. Its capital return program doesn't limit what it reinvests in its business. What it thinks makes good business sense does. The same is true for Huawei, which is why it hasn't been reinvesting all of its profits back in its business either.
Share value is completely volatile and has no relation to the actual value of the company, its a gamblers playground. So with 1 share left and ‘owning’ 100% of the company boils down to owning a share possibly valued $0, so you own nothing ...