Apple sells $7B in debt in first bond offer since $285B cash repatriation [u]

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Comments

  • Reply 61 of 90
    gatorguygatorguy Posts: 21,106member
    gatorguy said:
    urahara said:

    gatorguy said:
    gatorguy said:
    tjwolf said:
    gatorguy said:
    tjwolf said:

    gatorguy said:
    red oak said:
    Debt interest is tax deductible for Apple.  That brings the interest cost down to its dividend yield 

    So,  a nearly cost free way for Apple to buy back its own stock.   Makes a ton of sense, especially if Apple thinks the stock will 2 or 3X in the next 8 years 


    Nothing about the stock repurchase program makes any sense to me. Apple doesn't keep it, they burn it, and if there's some proof that the buybacks have increased the stock price above where it would otherwise be it's being keep secret. 
    This goes both ways: there's no proof that "they burn it" - that share buyback have had no impact on stock prices.  But in general, the laws of supply/demand would suggest that buybacks would positively impact stock price.
    There is proof the stock is "burned", zero residual value. But we do both agree there's no hard evidence (that you or I are privy to) that these Apple repurchases have boosted the stock price. 
    Where is the proof there's zero residual value?  You yourself admit in the next sentence that there's no proof that AAPL's share price was affected by the repurchase - there's also no proof that it wasn't.   Even the word "residual" could be wrong - for all we know, *all* of the value of the stock repurchase went into raising the stock price or keeping it from otherwise falling.
    Ah, I see there's a difference in the interpretation of "residual value". I'll put it differently:
    The Apple stock that is repurchased is retired, burned in effect, and has no residual book value. Indisputable fact.
    Is that better?

    On top of that there is no evidence you could offer that the stock repurchases have been effective in raising Apple stock price above the level it would have been anyway if the repurchase program did not exist in the form it does. 
    No, there isn't any hard evidence that buybacks affect the price and never will be -- simply because stock prices are ultimately determined by the market which in turn is subject to a wide spectrum of objective and subjective factors -- of which the buyback is only one.

    But, it certainly improves things like earnings per share simply because it creates fewer shares.
    I agree with the earnings per share, obviously. 
    You are so close to understand.
    Look for 'how earnings per share affect the share price and firm value'.
    Oh geez...
    Then it should be trivial for you to demonstrate it did so. How much higher is the stock price because of the buybacks? 
    ... in the long term, if they keep buying back shares and Apple manages to keep raking in the profits, the effect will become more and more pronounced, especially if they buy back and retire all of the shares except for mine!

    I could not argue with that bit of hope at all. LOL!
    muthuk_vanalingam
  • Reply 62 of 90
    gatorguygatorguy Posts: 21,106member
    MacPro said:
    gatorguy said:
    Duplicate
    Definitely one of your better posts ;)
    Thank you! :) I'll file that. 
    edited September 5 GeorgeBMac
  • Reply 63 of 90
    tmay said:
    tmay said:
    tmay said:
    gatorguy said:
    red oak said:
    Debt interest is tax deductible for Apple.  That brings the interest cost down to its dividend yield 

    So,  a nearly cost free way for Apple to buy back its own stock.   Makes a ton of sense, especially if Apple thinks the stock will 2 or 3X in the next 8 years 


    Nothing about the stock repurchase program makes any sense to me. Apple doesn't keep it, they burn it, and if there's some proof that the buybacks have increased the stock price above where it would otherwise be it's being keep secret. 
    "Makes a ton of sense, especially if Apple thinks the stock will 2 or 3X in the next 8 years"

    What red oak said.

    Your short term thinking correlating disbursements with stock value is the problem. That isn't the primary concern of Apple. Their plan is to disburse it back to the stockholder until they are cash neutral while at the same time, generating buybacks at a rate and timing that makes sense.


    Unfortunately, part of why their stock is where it is is due to the exraordinary dividends and buybacks propping up the price.   When that ends, the stock drops. 

    Further, if Apple wanted to invest in itself, it would.   Buybacks and dividends beyond current earings is essentially welfare for the stockholders -- the opposite of an investment.
    Apple is certainly investing in itself and especially R&D, and given that Apple is spending almost as much as the SOE Huawei that you fawn over, I'd say that Apple is in fact investing heavily. Your problem is that Apple has been such a money machine, that it will take another 5 years to get to cash neutral even with disbursing the repatriated funds as dividends. In the meantime, should there be a recession, Apple will be in a position to not only weather that, but likely pick up some bargains in small technology companies along the way.
    Yes, Apple does invest in R&D -- but not as much as they could or should (look at their problems in 5G modems or OLED screens -- both critical components of their core product) and obviously not as much Huawei who has.   Liquidating the organization with stockholder welfare is not a path to success.  Stating that they have a policy does not make it a smart policy.

    LOL.

    Apple just bought Intel's modem business, and also has a license to Qualcomm's IP so that they can develop their own 5G, and even with Huawei's server, surveillance and telecom businesses absorbing the bulk of Huawei's R&D, Apple's $14.5 B in R&D is still only a bit less than the mostly government owned Huawei. 

    What exactly do you expect Apple to spend more money on? Apple is routinely in the top five of profitable companies WW, and its hard to imagine a better run company.

    "Apple just bought Intel's modem business"  Boy, what a winner -- after waiting how many years for it to produce a 5G modem?
    "[Apple] has a license to Qualcomm's IP so that they can develop their own 5G" -- No, they surrendered so they have access to Qualcomm's 5G modems
    "Apple's $14.5 B in R&D is still only a bit less than the mostly government owned Huawei."   A bit less?  LOL...  and "government owned"?  There you go again, believing Trump!
    "What exactly do you expect Apple to spend more money on?"  I listed 2 things -- instead of sucking on the tits of Intel and Samsung
    "Apple is routinely in the top five of profitable companies"  Profitability says nothing about future viability.   American steel companies were incredibly profitable.   Then they squandered it instead of investing in themselves --- and then they weren't.

    Sorry, but Apple is "investing" far more in its managers and stockholders than in itself and its future.
    edited September 5 muthuk_vanalingam
  • Reply 64 of 90
    MacPro said:
    gatorguy said:
    Duplicate
    Definitely one of your better posts ;)
    I don't agree with him -- but cheap shots are, well, cheap.
    muthuk_vanalingamgatorguy
  • Reply 65 of 90
    gmac said:
    gatorguy said:
    tjwolf said:
    gatorguy said:
    tjwolf said:

    gatorguy said:
    red oak said:
    Debt interest is tax deductible for Apple.  That brings the interest cost down to its dividend yield 

    So,  a nearly cost free way for Apple to buy back its own stock.   Makes a ton of sense, especially if Apple thinks the stock will 2 or 3X in the next 8 years 


    Nothing about the stock repurchase program makes any sense to me. Apple doesn't keep it, they burn it, and if there's some proof that the buybacks have increased the stock price above where it would otherwise be it's being keep secret. 
    This goes both ways: there's no proof that "they burn it" - that share buyback have had no impact on stock prices.  But in general, the laws of supply/demand would suggest that buybacks would positively impact stock price.
    There is proof the stock is "burned", zero residual value. But we do both agree there's no hard evidence (that you or I are privy to) that these Apple repurchases have boosted the stock price. 
    Where is the proof there's zero residual value?  You yourself admit in the next sentence that there's no proof that AAPL's share price was affected by the repurchase - there's also no proof that it wasn't.   Even the word "residual" could be wrong - for all we know, *all* of the value of the stock repurchase went into raising the stock price or keeping it from otherwise falling.
    Ah, I see there's a difference in the interpretation of "residual value". I'll put it differently:
    The stock that is repurchased is retired, burned in effect, and has no residual book value. Is that better? On top of that there is not evidence you could offer that the stock repurchases were effective in raising Apple stock price above the level it would have been anyway if the repurchase program did not exist in the form it does. 
    Buying back and retiring the shares reduces the shares outstanding, which increases the EPS and keeping Apple's EPS multiple constant, the share price will go up. 
    Except, the P/E ratio has been falling lately with accelerated stock repurchase. Chances are, the P/E ratio would have fallen much more precipitously had it not being for hundreds of billions of dollars pumped into the share buybacks.   
    edited September 5
  • Reply 66 of 90
    tmaytmay Posts: 3,944member
    tmay said:
    tmay said:
    tmay said:
    gatorguy said:
    red oak said:
    Debt interest is tax deductible for Apple.  That brings the interest cost down to its dividend yield 

    So,  a nearly cost free way for Apple to buy back its own stock.   Makes a ton of sense, especially if Apple thinks the stock will 2 or 3X in the next 8 years 


    Nothing about the stock repurchase program makes any sense to me. Apple doesn't keep it, they burn it, and if there's some proof that the buybacks have increased the stock price above where it would otherwise be it's being keep secret. 
    "Makes a ton of sense, especially if Apple thinks the stock will 2 or 3X in the next 8 years"

    What red oak said.

    Your short term thinking correlating disbursements with stock value is the problem. That isn't the primary concern of Apple. Their plan is to disburse it back to the stockholder until they are cash neutral while at the same time, generating buybacks at a rate and timing that makes sense.


    Unfortunately, part of why their stock is where it is is due to the exraordinary dividends and buybacks propping up the price.   When that ends, the stock drops. 

    Further, if Apple wanted to invest in itself, it would.   Buybacks and dividends beyond current earings is essentially welfare for the stockholders -- the opposite of an investment.
    Apple is certainly investing in itself and especially R&D, and given that Apple is spending almost as much as the SOE Huawei that you fawn over, I'd say that Apple is in fact investing heavily. Your problem is that Apple has been such a money machine, that it will take another 5 years to get to cash neutral even with disbursing the repatriated funds as dividends. In the meantime, should there be a recession, Apple will be in a position to not only weather that, but likely pick up some bargains in small technology companies along the way.
    Yes, Apple does invest in R&D -- but not as much as they could or should (look at their problems in 5G modems or OLED screens -- both critical components of their core product) and obviously not as much Huawei who has.   Liquidating the organization with stockholder welfare is not a path to success.  Stating that they have a policy does not make it a smart policy.

    LOL.

    Apple just bought Intel's modem business, and also has a license to Qualcomm's IP so that they can develop their own 5G, and even with Huawei's server, surveillance and telecom businesses absorbing the bulk of Huawei's R&D, Apple's $14.5 B in R&D is still only a bit less than the mostly government owned Huawei. 

    What exactly do you expect Apple to spend more money on? Apple is routinely in the top five of profitable companies WW, and its hard to imagine a better run company.

    "Apple just bought Intel's modem business"  Boy, what a winner -- after waiting how many years for it to produce a 5G modem?
    "[Apple] has a license to Qualcomm's IP so that they can develop their own 5G" -- No, they surrendered so they have access to Qualcomm's 5G modems
    "Apple's $14.5 B in R&D is still only a bit less than the mostly government owned Huawei."   A bit less?  LOL...  and "government owned"?  There you go again, believing Trump!
    "What exactly do you expect Apple to spend more money on?"  I listed 2 things -- instead of sucking on the tits of Intel and Samsung
    "Apple is routinely in the top five of profitable companies"  Profitability says nothing about future viability.   American steel companies were incredibly profitable.   Then they squandered it instead of investing in themselves --- and then they weren't.

    Sorry, but Apple is "investing" far more in its managers and stockholders than in itself and its future.
    https://www.forbes.com/sites/tiriasresearch/2019/04/17/the-apple-qualcomm-deal-reaffirms-the-value-of-ip-and-technology-leadership/#6305c10e6dcc

    "This means Apple could theoretically offer a 5G iPhone as early as spring 2020 if the company starting designing Qualcomm modems into the upcoming iPhone designs now. TIRIAS Research believes that Apple will likely continue with its annual launch event in the fall with a new line of iPhones, but likely offer a 5G version as early as spring 2020.

    This also means that Apple will be licensing 5G IP from Qualcomm and other license holders under the Fair, Reasonable, And Non-Discriminatory (FRAND) terms established by ETSI, not just over the next six years, but throughout the 5thgeneration of wireless technology. Licensing for the 6th generation will depend on Apple’s participation in future standards efforts and IP development, which Apple has not previously done. So, even if Apple develops and integrates its own modem technology, Qualcomm will still receive IP royalties even if the company eventually loses the Apple chipset business."

    https://www.bloomberg.com/news/articles/2019-04-25/huawei-s-r-d-spending-balloons-as-u-s-tensions-flare-over-5g

    Not seeing that Huawei is spending much more in R&D than Apple, a billion a year more, but they are spending a higher proportion of their annual revenue. Again though, Apple is spending specifically on R&D for consumer technology, not for telecom, surveilance, or server businesses that Huawei has to support with R&D.

    Sorry, but Apple is in fact investing in its future.

    As fro Huawei being a Private Company, I posted a paper on that, but of course, China doesn't allow the kind of transparency in its corporations that the U.S. has. 

    Here's the link to the NY Times article on that paper, and Huawei's response;

    https://www.nytimes.com/2019/04/25/technology/who-owns-huawei.html

    Oh, and this is China,

    https://www.scmp.com/news/china/politics/article/3025739/xi-jinping-singles-out-hong-kong-macau-and-taiwan-major-risks


    edited September 5 jdb8167fastasleep
  • Reply 67 of 90
    tmaytmay Posts: 3,944member

    sirozha said:
    gmac said:
    gatorguy said:
    tjwolf said:
    gatorguy said:
    tjwolf said:

    gatorguy said:
    red oak said:
    Debt interest is tax deductible for Apple.  That brings the interest cost down to its dividend yield 

    So,  a nearly cost free way for Apple to buy back its own stock.   Makes a ton of sense, especially if Apple thinks the stock will 2 or 3X in the next 8 years 


    Nothing about the stock repurchase program makes any sense to me. Apple doesn't keep it, they burn it, and if there's some proof that the buybacks have increased the stock price above where it would otherwise be it's being keep secret. 
    This goes both ways: there's no proof that "they burn it" - that share buyback have had no impact on stock prices.  But in general, the laws of supply/demand would suggest that buybacks would positively impact stock price.
    There is proof the stock is "burned", zero residual value. But we do both agree there's no hard evidence (that you or I are privy to) that these Apple repurchases have boosted the stock price. 
    Where is the proof there's zero residual value?  You yourself admit in the next sentence that there's no proof that AAPL's share price was affected by the repurchase - there's also no proof that it wasn't.   Even the word "residual" could be wrong - for all we know, *all* of the value of the stock repurchase went into raising the stock price or keeping it from otherwise falling.
    Ah, I see there's a difference in the interpretation of "residual value". I'll put it differently:
    The stock that is repurchased is retired, burned in effect, and has no residual book value. Is that better? On top of that there is not evidence you could offer that the stock repurchases were effective in raising Apple stock price above the level it would have been anyway if the repurchase program did not exist in the form it does. 
    Buying back and retiring the shares reduces the shares outstanding, which increases the EPS and keeping Apple's EPS multiple constant, the share price will go up. 
    Except, the P/E ratio has been falling lately with accelerated stock repurchase. Chances are, the P/E ratio would have fallen much more precipitously had it not being for hundreds of billions of dollars pumped into the share buybacks.   
    https://www.macrotrends.net/stocks/charts/AAPL/apple/pe-ratio

    I'm not seeing what you are stating. If anything, P/E is trending up.
  • Reply 68 of 90
    I wonder why some people piss off about this?
    This is financial 101.

    If you have $10 million in bank with 2% interest gain/year and you need $1 million to buy new house.
    If the lender will gives you 1% interest loan then you will not take it? Or even 2% interest will be even out.
    Why would you spend your cash?
    fastasleep
  • Reply 69 of 90
    tmaytmay Posts: 3,944member
    YP101 said:
    I wonder why some people piss off about this?
    This is financial 101.

    If you have $10 million in bank with 2% interest gain/year and you need $1 million to buy new house.
    If the lender will gives you 1% interest loan then you will not take it? Or even 2% interest will be even out.
    Why would you spend your cash?
    There some talk of negative interest; companies are paid a small interest amount to borrow the money.
  • Reply 70 of 90
    eightzeroeightzero Posts: 2,487member
    The bonds now appear to be available for purchase. Like ~1.6%. 
    tmay
  • Reply 71 of 90
    flydog said:
    gatorguy said:
    red oak said:
    Debt interest is tax deductible for Apple.  That brings the interest cost down to its dividend yield 

    So,  a nearly cost free way for Apple to buy back its own stock.   Makes a ton of sense, especially if Apple thinks the stock will 2 or 3X in the next 8 years 


    Nothing about the stock repurchase program makes any sense to me. Apple doesn't keep it, they burn it, and if there's some proof that the buybacks have increased the stock price above where it would otherwise be it's being keep secret. 
    If you don’t understand something it’s best to keep your uninformed opinion to yourself. Share buybacks  increase earnings distributed to the remaining investors. That is reflected in both dividends and in the share price. 

    Apple’s board didn’t authorize share repurchases simply to piss away money for the hell of it. 
    Yeh, they pretty much did.   Apple the company reaps no benefit from shareholder welfare programs. 
    Not even close to being true. Apple employees, past and present, either own or have options to own AAPL. It well behooves Apple to support it’s stock price. Which buybacks do, propaganda utterances to the contrary notwithstanding.
    fastasleep
  • Reply 72 of 90

    gatorguy said:
    flydog said:
    gatorguy said:
    red oak said:
    Debt interest is tax deductible for Apple.  That brings the interest cost down to its dividend yield 

    So,  a nearly cost free way for Apple to buy back its own stock.   Makes a ton of sense, especially if Apple thinks the stock will 2 or 3X in the next 8 years 


    Nothing about the stock repurchase program makes any sense to me. Apple doesn't keep it, they burn it, and if there's some proof that the buybacks have increased the stock price above where it would otherwise be it's being keep secret. 
    If you don’t understand something it’s best to keep your uninformed opinion to yourself. 
    If you don't understand something you ask fellow forum members to chime in.

    Other than theory no one has yet shown that the price of Apple stock is higher than it would otherwise have been,much less by any particular percentage. It boils down to "it must be so, thus spake investors". 

    But yeah, EPS is demonstrably higher. It seems to this non-professional stock player that raising the dividends substantially would be a more direct and measurable way of returning cash to investors. Might even raise the stock price in the process based on what other members in this thread are saying.

    IMO trying to prop up a stock price with no means of measuring the results requires a leap of faith from you that it actually worked to your benefit. Are you typically driven by faith? 

    The stock market would be 10,000 points higher without the trade war. That's the claim. Have faith. 
    gatorguy said:
    flydog said:
    gatorguy said:
    red oak said:
    Debt interest is tax deductible for Apple.  That brings the interest cost down to its dividend yield 

    So,  a nearly cost free way for Apple to buy back its own stock.   Makes a ton of sense, especially if Apple thinks the stock will 2 or 3X in the next 8 years 


    Nothing about the stock repurchase program makes any sense to me. Apple doesn't keep it, they burn it, and if there's some proof that the buybacks have increased the stock price above where it would otherwise be it's being keep secret. 
    If you don’t understand something it’s best to keep your uninformed opinion to yourself. 
    If you don't understand something you ask fellow forum members to chime in.

    Other than theory no one has yet shown that the price of Apple stock is higher than it would otherwise have been,much less by any particular percentage. It boils down to "it must be so, thus spake investors". 

    But yeah, EPS is demonstrably higher. It seems to this non-professional stock player that raising the dividends substantially would be a more direct and measurable way of returning cash to investors. Might even raise the stock price in the process based on what other members in this thread are saying.

    IMO trying to prop up a stock price with no means of measuring the results requires a leap of faith from you that it actually worked to your benefit. Are you typically driven by faith? 

    The stock market would be 10,000 points higher without the trade war. That's the claim. Have faith. 
    Other than theory no one has yet shown that the price of Apple stock is higher than it would otherwise have been,much less by any particular percentage.”

     Do your own homework. I have, and it supports the idea that the price of Apple tracks EPS.
    edited September 5
  • Reply 73 of 90
    tmay said:
    YP101 said:
    I wonder why some people piss off about this?
    This is financial 101.

    If you have $10 million in bank with 2% interest gain/year and you need $1 million to buy new house.
    If the lender will gives you 1% interest loan then you will not take it? Or even 2% interest will be even out.
    Why would you spend your cash?
    There some talk of negative interest; companies are paid a small interest amount to borrow the money.
    For government bonds.  Investment grade corporate bonds like Apple's are still upwards of 3%
  • Reply 74 of 90
    flydog said:
    Very interesting. It seems like it could only mean that they have specific and unrealized plans for the pile of cash they’re already sitting on, and plans that they are confident will yield a better return than the bonds will for their purchasers, or one huge plan that will require all of the stockpile plus the additional funds, which seems less likely. Either way, it’s probably a good sign. 
    It doesn’t mean that at all. Only a complete moron would use his own cash with the current bond yields.
    In other words, interest rates are low, so Apple’s plans for the cash will yield a better return than the small amount of interest that they will have to pay, which is what I said (although it’s not the only possibility).
    edited September 5
  • Reply 75 of 90
    sacto joe said:
    flydog said:
    gatorguy said:
    red oak said:
    Debt interest is tax deductible for Apple.  That brings the interest cost down to its dividend yield 

    So,  a nearly cost free way for Apple to buy back its own stock.   Makes a ton of sense, especially if Apple thinks the stock will 2 or 3X in the next 8 years 


    Nothing about the stock repurchase program makes any sense to me. Apple doesn't keep it, they burn it, and if there's some proof that the buybacks have increased the stock price above where it would otherwise be it's being keep secret. 
    If you don’t understand something it’s best to keep your uninformed opinion to yourself. Share buybacks  increase earnings distributed to the remaining investors. That is reflected in both dividends and in the share price. 

    Apple’s board didn’t authorize share repurchases simply to piss away money for the hell of it. 
    Yeh, they pretty much did.   Apple the company reaps no benefit from shareholder welfare programs. 
    Not even close to being true. Apple employees, past and present, either own or have options to own AAPL. It well behooves Apple to support it’s stock price. Which buybacks do, propaganda utterances to the contrary notwithstanding.
    So, how does sinking a couple hundred billion into stock buybacks benefit anything but the stockholders?   It certainly does nothing to grow or strengthen the business.
  • Reply 76 of 90
    eightzero said:
    The bonds now appear to be available for purchase. Like ~1.6%. 
    "(Reuters) - Apple Inc (AAPL.O) said on Thursday it had sold $7 billion of bonds at yields ranging up to 103 basis points over the equivalent U.S. Treasury on maturities of up to 30 years, its first such debt issues since November 2017. "

    That would place them at around 3%.
    gatorguymuthuk_vanalingam
  • Reply 77 of 90
    gatorguy said:
    flydog said:
    gatorguy said:
    red oak said:
    Debt interest is tax deductible for Apple.  That brings the interest cost down to its dividend yield 

    So,  a nearly cost free way for Apple to buy back its own stock.   Makes a ton of sense, especially if Apple thinks the stock will 2 or 3X in the next 8 years 


    Nothing about the stock repurchase program makes any sense to me. Apple doesn't keep it, they burn it, and if there's some proof that the buybacks have increased the stock price above where it would otherwise be it's being keep secret. 
    If you don’t understand something it’s best to keep your uninformed opinion to yourself. 
    It boils down to "it must be so, thus spake investors". 

    This is exactly what it boils down to. A stock’s price in the market is determined by investors. Each one of us weighs whatever factors we think are important when we are deciding how much we would willing to buy or sell shares for. If somebody is willing to match your bid or offer, a trade is executed, and that becomes the new market price. So if you can convince a large number of investors that astrology, for example, impacts share price, it is 100% guaranteed to become a self-fulfilling prophecy, because it will begin to bear on supply and demand in a concrete way. So could I prove that astrology affects share price? Only if I can prove that there are investors who believe it does, but in that case yes, it would be a fact. 
    edited September 5
  • Reply 78 of 90
    gatorguygatorguy Posts: 21,106member
    gatorguy said:
    flydog said:
    gatorguy said:
    red oak said:
    Debt interest is tax deductible for Apple.  That brings the interest cost down to its dividend yield 

    So,  a nearly cost free way for Apple to buy back its own stock.   Makes a ton of sense, especially if Apple thinks the stock will 2 or 3X in the next 8 years 


    Nothing about the stock repurchase program makes any sense to me. Apple doesn't keep it, they burn it, and if there's some proof that the buybacks have increased the stock price above where it would otherwise be it's being keep secret. 
    If you don’t understand something it’s best to keep your uninformed opinion to yourself. 
    It boils down to "it must be so, thus spake investors". 

    This is exactly what it boils down to. A stock’s price in the market is determined by investors. Each one of us weighs whatever factors we think are important when we are deciding how much we would willing to buy or sell shares for. If somebody is willing to match your bid or offer, a trade is executed, and that becomes the new market price. So if you can convince a large number of investors that astrology, for example, impacts share price, it is 100% guaranteed to become a self-fulfilling prophecy, because it will begin to bear on supply and demand in a concrete way. So could I prove that astrology affects share price? Only if I can prove that there are investors who believe it does, but in that case yes, it would be a fact. 
    In general I agree with you. It's similar to religion in that regard, it works for church's because there's faith it does. 

    Does that make investors who believe there's a science behind it all and directly correlating to the profitability of the company itself a gullible bunch? Seems everyone could be taken down by a "scare" that has little basis for doing so beyond faith that it must be true. 

    With that said I do understand P&L, markup, tax implications, and other measurements involved in running (several) businesses and understand how to properly account for their value. Stock market not so much, so I stick with investment in plant, people, and inventory.

    You folks just continue on with faith that it's going to all work even if it's out of your hands, and that the methodology Apple chose for returning excess cash to its long-term investors is the best way to do so. For example I'm not seeing the advantage you guys do with stock repurchases over higher dividends, even a special disbursement where there's no question of how much of the excess cash you got. Now could execs with vested stock arrangements benefit more from potentially propping up a stock price via repurchases over disbursements thru dividends? I think so but not sure. 
    edited September 5 muthuk_vanalingam
  • Reply 79 of 90
    Yeah, anyone who thinks it’s directly correlated is mistaken.

    There are also a few other things to consider: Apple makes a ton of cash each quarter—so much that they don’t feel that they could efficiently spend all of it on things like R&D. As a result, they can distribute some of it to shareholders, but there aren’t so many ways to do that. When they pay a dividend, the underlying value of the shares theoretically decreases by the amount of the payout, because company assets have been distributed to shareholders’ individual bank accounts. Those shareholders pay tax on those dividends at the rate of normal income. If the company buys back shares, the underlying value of the shares does not decrease (and will increase in the future faster than it would have), because the money has been reinvested in the company, and gains from the share value will be subject to capital gains tax rates, which are 15% in the US if you hold the shares for more than a year, which is much lower than other income is normally taxed. As an additional benefit, when shares are bought back and retired, those shares no longer receive a dividend, so the company’s overall dividend payout is reduced. So for every million shares Apple buys back, they are saving $770,000 per quarter at the current dividend rate. This may not seem like a lot, but it adds up—according to this article, they saved almost a billion dollars in dividend payments last year just as a result of the shares they bought back in the first three quarters last year. Those same buybacks from last year will save them even more this year, because the dividend rate is higher now, and the more you buy back and the higher the dividend, the more you save. 
    gatorguyfastasleep
  • Reply 80 of 90
    gatorguygatorguy Posts: 21,106member
    Yeah, anyone who thinks it’s directly correlated is mistaken.

    There are also a few other things to consider: Apple makes a ton of cash each quarter—so much that they don’t feel that they could efficiently spend all of it on things like R&D. As a result, they can distribute some of it to shareholders, but there aren’t so many ways to do that. When they pay a dividend, the underlying value of the shares theoretically decreases by the amount of the payout, because company assets have been distributed to shareholders’ individual bank accounts. Those shareholders pay tax on those dividends at the rate of normal income. If the company buys back shares, the underlying value of the shares does not decrease (and will increase in the future faster than it would have), because the money has been reinvested in the company, and gains from the share value will be subject to capital gains tax rates, which are 15% in the US if you hold the shares for more than a year, which is much lower than other income is normally taxed. As an additional benefit, when shares are bought back and retired, those shares no longer receive a dividend, so the company’s overall dividend payout is reduced. So for every million shares Apple buys back, they are saving $770,000 per quarter at the current dividend rate. This may not seem like a lot, but it adds up—according to this article, they saved almost a billion dollars in dividend payments last year just as a result of the shares they bought back in the first three quarters last year. Those same buybacks from last year will save them even more this year, because the dividend rate is higher now, and the more you buy back and the higher the dividend, the more you save. 
    Thanks for that post!
    Excellent job explaining it, helps me better understand possible reasoning behind Apple choosing to go with stock buybacks rather than more direct dividend disbursements to reward investors. 


    muthuk_vanalingam
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