Always finding something to complain about, no matter what. Always knowing more than Apple does about its business. It never stops. Fantastic returns on stock BUT not a big enough dividend. Sheesh.
Well, yes. A higher share price does nothing but keep me from buying more. At some point, one would think a company would want to reward investors who stick with it. Profits on paper from higher share prices are nice, but, yes, I'd rather see the ratio of buybacks to dividends swing just a little more toward the latter.
While maybe not everybody’s cup of tea, I have used my gains to fund margin debt for various purposes, including buying more stock, along with writing covered calls. This has helped me to finally diversify my portfolio so I was at less than 90% AAPL. Margin interest can also be tax deductible (depending on various things), so it can be a win-win.
I would prefer a 2% dividend though to the stock buybacks.
You got me confused here. Apple is NOT being sucked dry—research investment continues to increase every quarter. They are awash in cash. If they did NOT return some of that cash to investors, they would be acting irresponsibly.
In any case, here is no way they could use that much cash wisely to grow their current businesses. They would have to buy out hundreds of other companies or expand from scratch into dozens of new markets. I have no interest in Apple losing focus like that. Furthermore, they would likely become a huge target for government breakup if they expanded into every sector they could think of.
You want that, invest in Samsung...
That's a great analogy, two-fold, especially the part about buy some other company or "buy" themselves. One way to look at this tho, is, it's like paying off your credit cards. All of the stock people "own" of your company is how much they loaned you, or Apple, in this case. So, like I said, it's similar to credit card debt if you need to relate to something...
I always keep thinking, what if they could buy ALL the stocks back and go private, i.e. have no debt, but for a company this large who knows, probably impossible. The only thing I wonder is WHO would own Apple, if there were no stocks? Just CEO and on down the line... IDK how that works, the fine print of reversing being PUBLIC, but be interesting to think about...
That's silly tho huh? haha
Apple isn't paying off debt or investing in the business. They're giving it away to shareholders -- which does nothing to grow or stabilize the business. Nothing, Nada. It only serves to shut up activist shareholders who are there to suck as much out of the company as they can.
They could at least do something productive with it -- like invest in those areas where they are weak. Or, barring that, follow the Carnegie model and donate it for the betterment of society.
Apple bought at all time highs in the last few weeks and will buy at much lower prices next buying period when Coronavirus whacks the price - dollar cost averaging.
From a business standpoint there is no difference between a company, any company, giving money away to stockholders or giving it away to charity. It is assets sucked out of the company and diminishing its ability to invest in itself. Basically, its akin to private equity coming in, sucking a company dry and then leaving it to its fate. They care nothing about the company and its business, only about their own wealth.
That is not how America was built. But it is how America will die -- or at least play second fiddle to countries and companies who act more responsibly.
You got me confused here. Apple is NOT being sucked dry—research investment continues to increase every quarter. They are awash in cash. If they did NOT return some of that cash to investors, they would be acting irresponsibly.
In any case, here is no way they could use that much cash wisely to grow their current businesses. They would have to buy out hundreds of other companies or expand from scratch into dozens of new markets. I have no interest in Apple losing focus like that. Furthermore, they would likely become a huge target for government breakup if they expanded into every sector they could think of.
You want that, invest in Samsung...
That all sounds good -- except, the real reason is: A number of years ago a few activist investors who don't give a damn about the business got involved and forced Apple to start giving away their assets to them. They saw a cash cow and decided to milk it. And they did.
It is a fair point that the industry pressured Apple to begin stock buybacks. However, unless Apple had done that the amount of cash on hand would have increased close to $500BB. That makes no sense and Apple cannot go and spend that money on acquisitions without having serious risk. The only criticism I have is that Apple's dividend could be higher. Doubling dividends with a total annual outlay of $7M would be reasonable.
Am I wrong here in figuring that $7M would get almost nowhere in doubling the dividend from $.77/share to $1.44/share? Wouldn't Apple need something close to $7 billion to pay $1.44/share?
Gmgravytrain & Larryjw perhaps have a valid point of view from those coming late to AAPL and who look at a stock as a dividend finance source. I'm a senior citizen (like Gmgravytrain) but I bought into AAPL @ $20 many years ago and held because they are a company that did, does, and will make superior products - and offer a great return on investment. From my perspective, dividends cannot compete. YMMV.
I bought into Apple at less than $10. It's not that I'm not happy with its current valuation, but as an investor who rolls over dividends and interest from investments into more investments (no spending on ATVs, second homes, a fifth TV), Apple buying less of its own stock and redirecting a little more to dividends would benefit me a little more at this point.
"Benefit you a little more at this point"? How much exactly do you need? If you bought at $10, as of today, you have made ~32 times that per share.Sounds like a good investment to me, why aren'r you selling some to realize your gains, putting that hypothetical dollar into your real pocket/savings plan/pension fund?
You got me confused here. Apple is NOT being sucked dry—research investment continues to increase every quarter. They are awash in cash. If they did NOT return some of that cash to investors, they would be acting irresponsibly.
In any case, here is no way they could use that much cash wisely to grow their current businesses. They would have to buy out hundreds of other companies or expand from scratch into dozens of new markets. I have no interest in Apple losing focus like that. Furthermore, they would likely become a huge target for government breakup if they expanded into every sector they could think of.
You want that, invest in Samsung...
That's a great analogy, two-fold, especially the part about buy some other company or "buy" themselves. One way to look at this tho, is, it's like paying off your credit cards. All of the stock people "own" of your company is how much they loaned you, or Apple, in this case. So, like I said, it's similar to credit card debt if you need to relate to something...
I always keep thinking, what if they could buy ALL the stocks back and go private, i.e. have no debt, but for a company this large who knows, probably impossible. The only thing I wonder is WHO would own Apple, if there were no stocks? Just CEO and on down the line... IDK how that works, the fine print of reversing being PUBLIC, but be interesting to think about...
That's silly tho huh? haha
Apple isn't paying off debt or investing in the business. They're giving it away to shareholders -- which does nothing to grow or stabilize the business. Nothing, Nada. It only serves to shut up activist shareholders who are there to suck as much out of the company as they can.
They could at least do something productive with it -- like invest in those areas where they are weak. Or, barring that, follow the Carnegie model and donate it for the betterment of society.
Corporations exist to make a profit, George. Get that through your coconut.
Apple's $10 billion spent on open market repurchases during the quarter erased 40 million shares at an average price of $250. That represents a steep discount over the current price of $320. Analysts who have been insisting that Apple's share repurchases were a waste of money are now looking particularly foolish.
Apple's executive team has explained for years why it was buying back its shares: it knew its shares were dramatically undervalued by investors in the market. It's pretty clear that they were right and that analysts looking at the company from the outside were dramatically wrong.
...
Indeed. I think a case can be made that Apple's buybacks over the last 8 years, considered collectively, represent one of the greatest financial moves we've ever see. Those buybacks have created a tremendous amount of wealth for its shareholders, in addition to the tremendous amount of wealth created by Apple's business operations.
Generally speaking, share buybacks concentrate future price moves. Sometimes it isn't clear whether a given buyback program helped a company's share price. But in Apple's class, the positive effect on share price of having bought back all those shares - at such a relatively low share price - is pretty clear.
Here are some numbers to consider. Apple has bought back nearly 2.5 billion shares at a cost of $324 billion for an average share price of $130, even though 30% of those shares have been bought within the last 2 years - i.e., at much higher prices. The effective cost of those buybacks - taking into account the offsetting effects on dividend payments and the net interest Apple has earned - is close to the amount paid for them, something like $320 billion.
If we want to consider where Apple's share price might be today if it just held that money instead, the clearest differences that we need to look at are these: Apple would have had an additional 2.5 billion shares outstanding and around an additional $320 billion on its books. (Comparing the effects of Apple's buybacks to some other action it might have taken - e.g., buying some other company or spending that money on developing a program to colonize Mars - would be more difficult. Suffice it to say, in hindsight it would be easy to come up with something else specific Apple could have bought that would have resulted in greater value creation.)
So how to consider those differences? The question would be, how differently would the market value Apple if it had another $320 billion on its books? $200 billion more? $300 billion more? $400 billion more? Given the dilution 2.5 billion additional outstanding shares would represent, and the current share price of over $327, the market would have to value Apple more than $800 billion higher (at a market cap above $2.2 trillion) - based on it having around $320 billion more on the books - in order for the share price to be the same. I don't think the market would do that. Assuming the market would value the $320 billion at 1-to-1 on top of what the market current values Apple at, the share price would be about $255. So I'd estimate the share buybacks have effectively added something like $70 to Apple's current share price. Those buybacks have concentrated Apple's market value gain to a smaller number of shares, taking advantage of the market having undervalued Apple for some long. This is a textbook case for when large share buybacks make sense and add value for shareholders.
Of course, we can't know the effects of a counterfactual for certain - it's a counterfactual after all. But in some cases we can get a pretty good idea and have considerable confidence about what might have happened had one thing changed.
Another way to consider Apple's share buybacks is this. Every dollar Apple has spent on buying AAPL shares has on average seen a return, based on the current share price, of about 33% per year. That's over an 8-year period and with over $300 billion spent. If a hedge-fund saw those kinds of returns, based on the value of the shares it currently held, we'd think that was pretty impressive. Or course we could look back and pick some stocks which would have, had Apple bought them instead, increased in value even more. But 30+% average annual gains? Not bad.
And to be clear, Apple could if it wanted to reissue those 2.5 billion shares and sell them. Even if it could only get, on average, half of the current share price for them, it would be nearly $90 billion ahead - i.e., it would have nearly $90 billion more in cash than it would have had it not bought shares back. At an average price of $250 per share, Apple would still be about $300 billion ahead.
I'm generally not a fan of returning capital to shareholders. Doing so is inconsistent with my big picture philosophy about equity investment - i.e., why I would choose to invest in equity in companies. But in some circumstances it makes since for companies to return capital. They've, e.g., made so much money that they can't foresee an operational use for much of that money, and they aren't interested in large acquisitions. At some point capital should be returned rather than just left to sit on the company's books, growing into a bigger and bigger pile, ad infinitum. Apple reached that point some years ago and started returning capital through dividends and, to a greater extent, through buybacks. From my perspective, buybacks are preferable - particularly when we're talking about large amounts of capital being returned. It gives the shareholders more flexibility when it comes to tax liability and allows individual shareholders to, if they want, achieve the same result as if they'd been paid a dividend instead. It doesn't work the same way in reverse. Buybacks are also better for rewarding ongoing shareholders.
As I said, I'm not generally a fan of public corporations returning capital to shareholders. But there has to be the prospect that some day they might, or else there's not much reason (outside of special cases) to own them - i.e., not much reason to invest in them and provide them with the capital they need to develop. If there was no prospect that corporations would return capital to shareholders, their share prices generally wouldn't increase as they do even if the businesses were successful.
While I'm not complaining about the share gains I have received from Apple since 2004, I'd just like to point out that Apple's dividends are only 1% and that seems rather low from a company always talking about cash neutrality. Even Microsoft is giving out higher dividends than Apple and has to give out about 3B more shares worth than Apple every quarter. If buying back shares are really helping shareholders, then that's fine but you look at Boeing and although it's struggling, that company gives out far higher dividends than cash-flow king Apple. I would think Apple could afford to give out a $1 a share in dividends than just $0.77. That would keep me flush every quarter as a senior citizen without having to touch my social security check
If Apple doesn't want to give out a higher dividend then why don't they acquire a cloud computing business since Wall Street claims the CLOUD has unlimited growth potential and they endlessly praise every company that has a cloud service such as Alphabet, Microsoft, and Amazon. Those companies get such fat P/Es based on their cloud services while Apple only gets criticism about falling iPhone sales.
I agree. From a stockholder's perspective, all I get from higher stock prices is a more impressive looking portfolio -- which until the stock is sold -- has zero actual value. Dividends are in my pocket, and after taxes, I get to take that money and buy more stock -- Apple's or another company. I can't do anything with merely high stock prices.
With share buybacks, you have the option to have the effects of buybacks or the effects of paid dividends. With dividends, you don't have the option - the choice is made for you.
When Apple buys back and retires shares, it is effectively buying more Apple for its existing shareholders. If you've held Apple over the last 8 years, you now own 57% more of Apple than you would have had Apple not bought back shares. The share count is the same, but the meaning (and value) of those shares is different.
If at any point, instead of owning more Apple, you'd prefer to have cash you can sell a portion of your shares equal to the effective increase in ownership the buybacks have created. Then you'd effectively have a cash dividend and maintain the same ownership of Apple. You could use that money to buy shares of other companies if you want, just as you could if Apple had paid a dividend instead of buying back shares. The option is yours; you get to choose the timing of the tax liability. If Apple pays dividends and I'd prefer more ownership of Apple to the cash, I can't effectively undo what Apple did and have my preference. The payment of the dividends chooses the timing of the tax liability for me.
Apple's $10 billion spent on open market repurchases during the quarter erased 40 million shares at an average price of $250. That represents a steep discount over the current price of $320. Analysts who have been insisting that Apple's share repurchases were a waste of money are now looking particularly foolish.
Apple's executive team has explained for years why it was buying back its shares: it knew its shares were dramatically undervalued by investors in the market. It's pretty clear that they were right and that analysts looking at the company from the outside were dramatically wrong.
...
Indeed. I think a case can be made that Apple's buybacks over the last 8 years, considered collectively, represent one of the greatest financial moves we've ever see. Those buybacks have created a tremendous amount of wealth for its shareholders, in addition to the tremendous amount of wealth created by Apple's business operations.
Generally speaking, share buybacks concentrate future price moves. Sometimes it isn't clear whether a given buyback program helped a company's share price. But in Apple's class, the positive effect on share price of having bought back all those shares - at such a relatively low share price - is pretty clear.
Here are some numbers to consider. Apple has bought back nearly 2.5 billion shares at a cost of $324 billion for an average share price of $130, even though 30% of those shares have been bought within the last 2 years - i.e., at much higher prices. The effective cost of those buybacks - taking into account the offsetting effects on dividend payments and the net interest Apple has earned - is close to the amount paid for them, something like $320 billion.
If we want to consider where Apple's share price might be today if it just held that money instead, the clearest differences that we need to look at are these: Apple would have had an additional 2.5 billion shares outstanding and around an additional $320 billion on its books. (Comparing the effects of Apple's buybacks to some other action it might have taken - e.g., buying some other company or spending that money on developing a program to colonize Mars - would be more difficult. Suffice it to say, in hindsight it would be easy to come up with something else specific Apple could have bought that would have resulted in greater value creation.)
So how to consider those differences? The question would be, how differently would the market value Apple if it had another $320 billion on its books? $200 billion more? $300 billion more? $400 billion more? Given the dilution 2.5 billion additional outstanding shares would represent, and the current share price of over $327, the market would have to value Apple more than $800 billion higher (at a market cap above $2.2 trillion) - based on it having around $320 billion more on the books - in order for the share price to be the same. I don't think the market would do that. Assuming the market would value the $320 billion at 1-to-1 on top of what the market current values Apple at, the share price would be about $255. So I'd estimate the share buybacks have effectively added something like $70 to Apple's current share price. Those buybacks have concentrated Apple's market value gain to a smaller number of shares, taking advantage of the market having undervalued Apple for some long. This is a textbook case for when large share buybacks make sense and add value for shareholders.
Of course, we can't know the effects of a counterfactual for certain - it's a counterfactual after all. But in some cases we can get a pretty good idea and have considerable confidence about what might have happened had one thing changed.
Another way to consider Apple's share buybacks is this. Every dollar Apple has spent on buying AAPL shares has on average seen a return, based on the current share price, of about 33% per year. That's over an 8-year period and with over $300 billion spent. If a hedge-fund saw those kinds of returns, based on the value of the shares it currently held, we'd think that was pretty impressive. Or course we could look back and pick some stocks which would have, had Apple bought them instead, increased in value even more. But 30+% average annual gains? Not bad.
And to be clear, Apple could if it wanted to reissue those 2.5 billion shares and sell them. Even if it could only get, on average, half of the current share price for them, it would be nearly $90 billion ahead - i.e., it would have nearly $90 billion more in cash than it would have had it not bought shares back. At an average price of $250 per share, Apple would still be about $300 billion ahead.
I'm generally not a fan of returning capital to shareholders. Doing so is inconsistent with my big picture philosophy about equity investment - i.e., why I would choose to invest in equity in companies. But in some circumstances it makes since for companies to return capital. They've, e.g., made so much money that they can't foresee an operational use for much of that money, and they aren't interested in large acquisitions. At some point capital should be returned rather than just left to sit on the company's books, growing into a bigger and bigger pile, ad infinitum. Apple reached that point some years ago and started returning capital through dividends and, to a greater extent, through buybacks. From my perspective, buybacks are preferable - particularly when we're talking about large amounts of capital being returned. It gives the shareholders more flexibility when it comes to tax liability and allows individual shareholders to, if they want, achieve the same result as if they'd been paid a dividend instead. It doesn't work the same way in reverse. Buybacks are also better for rewarding ongoing shareholders.
As I said, I'm not generally a fan of public corporations returning capital to shareholders. But there has to be the prospect that some day they might, or else there's not much reason (outside of special cases) to own them - i.e., not much reason to invest in them and provide them with the capital they need to develop. If there was no prospect that corporations would return capital to shareholders, their share prices generally wouldn't increase as they do even if the businesses were successful.
Carnegie, you have no factual evidence whatsoever that Apple's stock repurchase program has been a primary driver behind the substantial rise in their stock price. For that matter you have no factual evidence that it has had any positive effect at all minimally equal to the cost. Isn't that true?
There is at best circumstantial evidence, and yes I recognize it, but that becomes questionably reliable when you compare it to the rise in stock value of the other FAANGS, some of whom are not repurchasing their shares yet have seen their share price soar alongside Apple. FWIW I see this market as a mirror of the 80's and 90's Bull markets when you could throw darts at a stock chart and pick a winner, but that's just my own personal observation.
IMO the stock repurchase program it seems to have been designed by and intended to benefit a rather narrow albeit wealthy group of investors and stockholders, not that I particularly care if that's what they want to do. I have no dog in the fight and own no Apple stock.
Apple's $10 billion spent on open market repurchases during the quarter erased 40 million shares at an average price of $250. That represents a steep discount over the current price of $320. Analysts who have been insisting that Apple's share repurchases were a waste of money are now looking particularly foolish.
Apple's executive team has explained for years why it was buying back its shares: it knew its shares were dramatically undervalued by investors in the market. It's pretty clear that they were right and that analysts looking at the company from the outside were dramatically wrong.
...
Indeed. I think a case can be made that Apple's buybacks over the last 8 years, considered collectively, represent one of the greatest financial moves we've ever see. Those buybacks have created a tremendous amount of wealth for its shareholders, in addition to the tremendous amount of wealth created by Apple's business operations.
Generally speaking, share buybacks concentrate future price moves. Sometimes it isn't clear whether a given buyback program helped a company's share price. But in Apple's class, the positive effect on share price of having bought back all those shares - at such a relatively low share price - is pretty clear.
Here are some numbers to consider. Apple has bought back nearly 2.5 billion shares at a cost of $324 billion for an average share price of $130, even though 30% of those shares have been bought within the last 2 years - i.e., at much higher prices. The effective cost of those buybacks - taking into account the offsetting effects on dividend payments and the net interest Apple has earned - is close to the amount paid for them, something like $320 billion.
If we want to consider where Apple's share price might be today if it just held that money instead, the clearest differences that we need to look at are these: Apple would have had an additional 2.5 billion shares outstanding and around an additional $320 billion on its books. (Comparing the effects of Apple's buybacks to some other action it might have taken - e.g., buying some other company or spending that money on developing a program to colonize Mars - would be more difficult. Suffice it to say, in hindsight it would be easy to come up with something else specific Apple could have bought that would have resulted in greater value creation.)
So how to consider those differences? The question would be, how differently would the market value Apple if it had another $320 billion on its books? $200 billion more? $300 billion more? $400 billion more? Given the dilution 2.5 billion additional outstanding shares would represent, and the current share price of over $327, the market would have to value Apple more than $800 billion higher (at a market cap above $2.2 trillion) - based on it having around $320 billion more on the books - in order for the share price to be the same. I don't think the market would do that. Assuming the market would value the $320 billion at 1-to-1 on top of what the market current values Apple at, the share price would be about $255. So I'd estimate the share buybacks have effectively added something like $70 to Apple's current share price. Those buybacks have concentrated Apple's market value gain to a smaller number of shares, taking advantage of the market having undervalued Apple for some long. This is a textbook case for when large share buybacks make sense and add value for shareholders.
Of course, we can't know the effects of a counterfactual for certain - it's a counterfactual after all. But in some cases we can get a pretty good idea and have considerable confidence about what might have happened had one thing changed.
Another way to consider Apple's share buybacks is this. Every dollar Apple has spent on buying AAPL shares has on average seen a return, based on the current share price, of about 33% per year. That's over an 8-year period and with over $300 billion spent. If a hedge-fund saw those kinds of returns, based on the value of the shares it currently held, we'd think that was pretty impressive. Or course we could look back and pick some stocks which would have, had Apple bought them instead, increased in value even more. But 30+% average annual gains? Not bad.
And to be clear, Apple could if it wanted to reissue those 2.5 billion shares and sell them. Even if it could only get, on average, half of the current share price for them, it would be nearly $90 billion ahead - i.e., it would have nearly $90 billion more in cash than it would have had it not bought shares back. At an average price of $250 per share, Apple would still be about $300 billion ahead.
I'm generally not a fan of returning capital to shareholders. Doing so is inconsistent with my big picture philosophy about equity investment - i.e., why I would choose to invest in equity in companies. But in some circumstances it makes since for companies to return capital. They've, e.g., made so much money that they can't foresee an operational use for much of that money, and they aren't interested in large acquisitions. At some point capital should be returned rather than just left to sit on the company's books, growing into a bigger and bigger pile, ad infinitum. Apple reached that point some years ago and started returning capital through dividends and, to a greater extent, through buybacks. From my perspective, buybacks are preferable - particularly when we're talking about large amounts of capital being returned. It gives the shareholders more flexibility when it comes to tax liability and allows individual shareholders to, if they want, achieve the same result as if they'd been paid a dividend instead. It doesn't work the same way in reverse. Buybacks are also better for rewarding ongoing shareholders.
As I said, I'm not generally a fan of public corporations returning capital to shareholders. But there has to be the prospect that some day they might, or else there's not much reason (outside of special cases) to own them - i.e., not much reason to invest in them and provide them with the capital they need to develop. If there was no prospect that corporations would return capital to shareholders, their share prices generally wouldn't increase as they do even if the businesses were successful.
Carnegie, you have no factual evidence whatsoever that Apple's stock repurchase program has been a primary driver behind the substantial rise in their stock price. For that matter you have no factual evidence that it has had any positive effect at all minimally equal to the cost. Isn't that true?
There is at best circumstantial evidence, and yes I recognize it, but that becomes questionably reliable when you compare it to the rise in stock value of the other FAANGS, some of whom are not repurchasing their shares yet have seen their share price soar alongside Apple. FWIW I see this market as a mirror of the 80's and 90's Bull markets when you could throw darts at a stock chart and pick a winner, but that's just my own personal observation.
IMO the stock repurchase program it seems to have been designed by and intended to benefit a rather narrow albeit wealthy group of investors and stockholders, not that I particularly care if that's what they want to do. I have no dog in the fight and own no Apple stock.
We've discussed this before. It's a counterfactual, so of course there's no evidence for it. There's no evidence that, had our sun blown up last week, there'd be no human life on earth now. But, based on my understanding of how some things work, I can say with confidence that had our sun blown up last week, there'd be no human life on earth now. Although I can't prove that with evidence, I feel sure enough about it to conclude it is almost certain to be true.
The nature of counterfactuals is that you can't prove their effects. They didn't happen, so theirs no evidence from them; that's the point. But we do this all the time - based on your understandings of how things work and what evidence we have from the actual reality we're in (i.e. not the counterfactual one), we conclude (and sometimes act accordingly) what the effects of a counterfactual would have been. Sometimes they're easy to confidently assess, sometimes they aren't.
As to your last point, yes - the buybacks were intended to benefit Apple shareholders. That's the (not-so) narrow group directly affected. Or course, many others are indirectly affected. But that's much the point of equity ownership, to make money off of your investment. And to that end, Apple has been returning capital to shareholders in one of the limited ways that it can.
That said, the best way we can analyze the effects on share price of Apple's buybacks is the one I've walked though a few times: To consider what the share price might have been had Apple not done the buybacks. I'm comparing to the situation where the only thing different is that Apple didn't buy back shares, it just held onto that cash as it had been doing before. As I pointed out, comparing to some other possibility - e.g., Apple having instead spent that money to develop a Mars colonization program - would be more difficult.
So what would be different if Apple had just kept that cash? The things we can see quite clearly are these: Apple would have an additional 2.5 billion shares outstanding and it would have something like $320 billion more. From there the all-other-things-being-equal comparison is pretty simple. With an additional 2.5 billion shares outstanding, Apple's market cap would need to be $800+ billion higher than it is now in order for the share price to be what it is now. What would justify that higher valuation? Apple would have an extra $320 billion in net-cash. I can confidently conclude that the market would not, based on that additional net-cash, value Apple more than $800 billion higher than it does now.
Again, no one can prove that because it's a counterfactual. But that doesn't mean that, in some cases, we don't have enough information and understanding to be pretty confident.
I'm a Redskins fan. I can confidently say that had Alex Smith not had his leg broken in 2018, they still wouldn't have won the Super Bowl this past year. I can't prove that, of course. But I don't think I'd get much argument on the issue from other Redskins fans.
Apple's $10 billion spent on open market repurchases during the quarter erased 40 million shares at an average price of $250. That represents a steep discount over the current price of $320. Analysts who have been insisting that Apple's share repurchases were a waste of money are now looking particularly foolish.
Apple's executive team has explained for years why it was buying back its shares: it knew its shares were dramatically undervalued by investors in the market. It's pretty clear that they were right and that analysts looking at the company from the outside were dramatically wrong.
...
Indeed. I think a case can be made that Apple's buybacks over the last 8 years, considered collectively, represent one of the greatest financial moves we've ever see. Those buybacks have created a tremendous amount of wealth for its shareholders, in addition to the tremendous amount of wealth created by Apple's business operations.
Generally speaking, share buybacks concentrate future price moves. Sometimes it isn't clear whether a given buyback program helped a company's share price. But in Apple's class, the positive effect on share price of having bought back all those shares - at such a relatively low share price - is pretty clear.
Here are some numbers to consider. Apple has bought back nearly 2.5 billion shares at a cost of $324 billion for an average share price of $130, even though 30% of those shares have been bought within the last 2 years - i.e., at much higher prices. The effective cost of those buybacks - taking into account the offsetting effects on dividend payments and the net interest Apple has earned - is close to the amount paid for them, something like $320 billion.
If we want to consider where Apple's share price might be today if it just held that money instead, the clearest differences that we need to look at are these: Apple would have had an additional 2.5 billion shares outstanding and around an additional $320 billion on its books. (Comparing the effects of Apple's buybacks to some other action it might have taken - e.g., buying some other company or spending that money on developing a program to colonize Mars - would be more difficult. Suffice it to say, in hindsight it would be easy to come up with something else specific Apple could have bought that would have resulted in greater value creation.)
So how to consider those differences? The question would be, how differently would the market value Apple if it had another $320 billion on its books? $200 billion more? $300 billion more? $400 billion more? Given the dilution 2.5 billion additional outstanding shares would represent, and the current share price of over $327, the market would have to value Apple more than $800 billion higher (at a market cap above $2.2 trillion) - based on it having around $320 billion more on the books - in order for the share price to be the same. I don't think the market would do that. Assuming the market would value the $320 billion at 1-to-1 on top of what the market current values Apple at, the share price would be about $255. So I'd estimate the share buybacks have effectively added something like $70 to Apple's current share price. Those buybacks have concentrated Apple's market value gain to a smaller number of shares, taking advantage of the market having undervalued Apple for some long. This is a textbook case for when large share buybacks make sense and add value for shareholders.
Of course, we can't know the effects of a counterfactual for certain - it's a counterfactual after all. But in some cases we can get a pretty good idea and have considerable confidence about what might have happened had one thing changed.
Another way to consider Apple's share buybacks is this. Every dollar Apple has spent on buying AAPL shares has on average seen a return, based on the current share price, of about 33% per year. That's over an 8-year period and with over $300 billion spent. If a hedge-fund saw those kinds of returns, based on the value of the shares it currently held, we'd think that was pretty impressive. Or course we could look back and pick some stocks which would have, had Apple bought them instead, increased in value even more. But 30+% average annual gains? Not bad.
And to be clear, Apple could if it wanted to reissue those 2.5 billion shares and sell them. Even if it could only get, on average, half of the current share price for them, it would be nearly $90 billion ahead - i.e., it would have nearly $90 billion more in cash than it would have had it not bought shares back. At an average price of $250 per share, Apple would still be about $300 billion ahead.
I'm generally not a fan of returning capital to shareholders. Doing so is inconsistent with my big picture philosophy about equity investment - i.e., why I would choose to invest in equity in companies. But in some circumstances it makes since for companies to return capital. They've, e.g., made so much money that they can't foresee an operational use for much of that money, and they aren't interested in large acquisitions. At some point capital should be returned rather than just left to sit on the company's books, growing into a bigger and bigger pile, ad infinitum. Apple reached that point some years ago and started returning capital through dividends and, to a greater extent, through buybacks. From my perspective, buybacks are preferable - particularly when we're talking about large amounts of capital being returned. It gives the shareholders more flexibility when it comes to tax liability and allows individual shareholders to, if they want, achieve the same result as if they'd been paid a dividend instead. It doesn't work the same way in reverse. Buybacks are also better for rewarding ongoing shareholders.
As I said, I'm not generally a fan of public corporations returning capital to shareholders. But there has to be the prospect that some day they might, or else there's not much reason (outside of special cases) to own them - i.e., not much reason to invest in them and provide them with the capital they need to develop. If there was no prospect that corporations would return capital to shareholders, their share prices generally wouldn't increase as they do even if the businesses were successful.
Carnegie, you have no factual evidence whatsoever that Apple's stock repurchase program has been a primary driver behind the substantial rise in their stock price. For that matter you have no factual evidence that it has had any positive effect at all minimally equal to the cost. Isn't that true?
There is at best circumstantial evidence, and yes I recognize it, but that becomes questionably reliable when you compare it to the rise in stock value of the other FAANGS, some of whom are not repurchasing their shares yet have seen their share price soar alongside Apple. FWIW I see this market as a mirror of the 80's and 90's Bull markets when you could throw darts at a stock chart and pick a winner, but that's just my own personal observation.
IMO the stock repurchase program it seems to have been designed by and intended to benefit a rather narrow albeit wealthy group of investors and stockholders, not that I particularly care if that's what they want to do. I have no dog in the fight and own no Apple stock.
We've discussed this before. It's a counterfactual, so of course there's no evidence for it.
A counterfactual? When the premise is wrong the argument is wrong, and your premise is wrong.
You are claiming a fact, and I'm challenging your portrayal of it as one.
I'm not at all claiming SOMETHING positive may have come from the repurchase program. I'm challenging you for proof of the effectiveness you claim is so clear and obvious As is, it is just as likely that the effort has been largely ineffective and returning excess cash to the investors via direct distribution would be the better way of seeing investors were rewarded.
I've read various articles before both recent and old, some promoting stock repurchase programs where the company retains the stock, others where they do not, and still others claiming dividends are the proper way. None of the ones promoting repurchase programs address the wisdom of doing so in a Bull Market which we've had for several years now.
You on the other hand say "I think a case can be made that Apple's buybacks over the last 8 years, considered collectively, represent one of the greatest financial moves we've ever see(n). Those buybacks have created a tremendous amount of wealth for its shareholders... in Apple's class (sic), the positive effect on share price of having bought back all those shares - at such a relatively low share price - is pretty clear."
IMO it is not at all clear and I would tend to agree with some other Apple stockholders posting here, that in today's' market conditions which have existed for some time now higher dividends would be the more equitable, efficient, and measurable method of distributing excessive cash. "Trust me, repurchase works," isn't the same as a check in hand especially if holding that Apple stock for retirement when any effect from the program has long since dissipated.
Apple's $10 billion spent on open market repurchases during the quarter erased 40 million shares at an average price of $250. That represents a steep discount over the current price of $320. Analysts who have been insisting that Apple's share repurchases were a waste of money are now looking particularly foolish.
Apple's executive team has explained for years why it was buying back its shares: it knew its shares were dramatically undervalued by investors in the market. It's pretty clear that they were right and that analysts looking at the company from the outside were dramatically wrong.
...
Indeed. I think a case can be made that Apple's buybacks over the last 8 years, considered collectively, represent one of the greatest financial moves we've ever see. Those buybacks have created a tremendous amount of wealth for its shareholders, in addition to the tremendous amount of wealth created by Apple's business operations.
Generally speaking, share buybacks concentrate future price moves. Sometimes it isn't clear whether a given buyback program helped a company's share price. But in Apple's class, the positive effect on share price of having bought back all those shares - at such a relatively low share price - is pretty clear.
Here are some numbers to consider. Apple has bought back nearly 2.5 billion shares at a cost of $324 billion for an average share price of $130, even though 30% of those shares have been bought within the last 2 years - i.e., at much higher prices. The effective cost of those buybacks - taking into account the offsetting effects on dividend payments and the net interest Apple has earned - is close to the amount paid for them, something like $320 billion.
If we want to consider where Apple's share price might be today if it just held that money instead, the clearest differences that we need to look at are these: Apple would have had an additional 2.5 billion shares outstanding and around an additional $320 billion on its books. (Comparing the effects of Apple's buybacks to some other action it might have taken - e.g., buying some other company or spending that money on developing a program to colonize Mars - would be more difficult. Suffice it to say, in hindsight it would be easy to come up with something else specific Apple could have bought that would have resulted in greater value creation.)
So how to consider those differences? The question would be, how differently would the market value Apple if it had another $320 billion on its books? $200 billion more? $300 billion more? $400 billion more? Given the dilution 2.5 billion additional outstanding shares would represent, and the current share price of over $327, the market would have to value Apple more than $800 billion higher (at a market cap above $2.2 trillion) - based on it having around $320 billion more on the books - in order for the share price to be the same. I don't think the market would do that. Assuming the market would value the $320 billion at 1-to-1 on top of what the market current values Apple at, the share price would be about $255. So I'd estimate the share buybacks have effectively added something like $70 to Apple's current share price. Those buybacks have concentrated Apple's market value gain to a smaller number of shares, taking advantage of the market having undervalued Apple for some long. This is a textbook case for when large share buybacks make sense and add value for shareholders.
Of course, we can't know the effects of a counterfactual for certain - it's a counterfactual after all. But in some cases we can get a pretty good idea and have considerable confidence about what might have happened had one thing changed.
Another way to consider Apple's share buybacks is this. Every dollar Apple has spent on buying AAPL shares has on average seen a return, based on the current share price, of about 33% per year. That's over an 8-year period and with over $300 billion spent. If a hedge-fund saw those kinds of returns, based on the value of the shares it currently held, we'd think that was pretty impressive. Or course we could look back and pick some stocks which would have, had Apple bought them instead, increased in value even more. But 30+% average annual gains? Not bad.
And to be clear, Apple could if it wanted to reissue those 2.5 billion shares and sell them. Even if it could only get, on average, half of the current share price for them, it would be nearly $90 billion ahead - i.e., it would have nearly $90 billion more in cash than it would have had it not bought shares back. At an average price of $250 per share, Apple would still be about $300 billion ahead.
I'm generally not a fan of returning capital to shareholders. Doing so is inconsistent with my big picture philosophy about equity investment - i.e., why I would choose to invest in equity in companies. But in some circumstances it makes since for companies to return capital. They've, e.g., made so much money that they can't foresee an operational use for much of that money, and they aren't interested in large acquisitions. At some point capital should be returned rather than just left to sit on the company's books, growing into a bigger and bigger pile, ad infinitum. Apple reached that point some years ago and started returning capital through dividends and, to a greater extent, through buybacks. From my perspective, buybacks are preferable - particularly when we're talking about large amounts of capital being returned. It gives the shareholders more flexibility when it comes to tax liability and allows individual shareholders to, if they want, achieve the same result as if they'd been paid a dividend instead. It doesn't work the same way in reverse. Buybacks are also better for rewarding ongoing shareholders.
As I said, I'm not generally a fan of public corporations returning capital to shareholders. But there has to be the prospect that some day they might, or else there's not much reason (outside of special cases) to own them - i.e., not much reason to invest in them and provide them with the capital they need to develop. If there was no prospect that corporations would return capital to shareholders, their share prices generally wouldn't increase as they do even if the businesses were successful.
Carnegie, you have no factual evidence whatsoever that Apple's stock repurchase program has been a primary driver behind the substantial rise in their stock price. For that matter you have no factual evidence that it has had any positive effect at all minimally equal to the cost. Isn't that true?
There is at best circumstantial evidence, and yes I recognize it, but that becomes questionably reliable when you compare it to the rise in stock value of the other FAANGS, some of whom are not repurchasing their shares yet have seen their share price soar alongside Apple. FWIW I see this market as a mirror of the 80's and 90's Bull markets when you could throw darts at a stock chart and pick a winner, but that's just my own personal observation.
IMO the stock repurchase program it seems to have been designed by and intended to benefit a rather narrow albeit wealthy group of investors and stockholders, not that I particularly care if that's what they want to do. I have no dog in the fight and own no Apple stock.
We've discussed this before. It's a counterfactual, so of course there's no evidence for it.
A counterfactual? When the premise is wrong the argument is wrong, and your premise is wrong.
You are claiming a fact, and I'm challenging your portrayal of it as one.
I'm not at all claiming SOMETHING positive may have come from the repurchase program. I'm challenging you for proof of the effectiveness you claim is so clear and obvious As is, it is just as likely that the effort has been largely ineffective and returning excess cash to the investors via direct distribution would be the better way of seeing investors were rewarded.
I've read various articles before both recent and old, some promoting stock repurchase programs where the company retains the stock, others where they do not, and still others claiming dividends are the proper way. None of the ones promoting repurchase programs address the wisdom of doing so in a Bull Market which we've had for several years now.
You on the other hand say "I think a case can be made that Apple's buybacks over the last 8 years, considered collectively, represent one of the greatest financial moves we've ever see(n). Those buybacks have created a tremendous amount of wealth for its shareholders... in Apple's class (sic), the positive effect on share price of having bought back all those shares - at such a relatively low share price - is pretty clear."
IMO it is not at all clear and I would tend to agree with some other Apple stockholders posting here, that in today's' market conditions which have existed for some time now higher dividends would be the more equitable, efficient, and measurable method of distributing excessive cash. "Trust me, repurchase works," isn't the same as a check in hand especially if holding that Apple stock for retirement when any effect from the program has long since dissipated.
I'm not claiming it's a fact that Apple's share price has benefited from Apple's buybacks. I have repeatedly made the point that we're comparing to a counterfactual which means, by its nature, that we can't know as a fact what the case would have been in that counterfactual. It didn't actually happen; that reality doesn't exist. There's no evidence existing from that alternate reality.
What I've done is assess the likelihood of what the case would be in that counterfactual. And I've provided the basis of that assessment numerous times. We do that kind of thing quite often. Much of our decision making as humans is based on our assessments of the affects of things as compared to counterfactuals. Sometimes we can't know with much certainty. Sometimes we can. In this case it's pretty clear that all-other-things-being equal, the comparison between Apple having done the buybacks and Apple still having that cash strongly suggests that the share price has benefitted from the buybacks. I've provided the simple math which supports that assertion.
That said, I've not been arguing that share repurchases are beneficial in general. Studies or commentary regarding the merits of buybacks in general don't address whether Apple's buybacks in particular have had a given effect. Of course some buybacks have been good in certain ways while others have been bad in those ways. Some buybacks are done for what I'd call wrong reasons - e.g., to short-term prop up the price of shares of a company that's business operations aren't performing well. As I indicated, more than anything, share buybacks tend to concentrate future share price movements.
As for dividends, I've also commented on why I prefer buybacks to dividends. Others are, of course, free to have a different preference. But buybacks provide for flexibility to shareholders when it comes to tax liability and - if we're comparing to a large, special dividend meant to return a lot of capital quickly - buybacks more-so reward ongoing shareholders.
Comments
You forgot the split /7!
Generally speaking, share buybacks concentrate future price moves. Sometimes it isn't clear whether a given buyback program helped a company's share price. But in Apple's class, the positive effect on share price of having bought back all those shares - at such a relatively low share price - is pretty clear.
Here are some numbers to consider. Apple has bought back nearly 2.5 billion shares at a cost of $324 billion for an average share price of $130, even though 30% of those shares have been bought within the last 2 years - i.e., at much higher prices. The effective cost of those buybacks - taking into account the offsetting effects on dividend payments and the net interest Apple has earned - is close to the amount paid for them, something like $320 billion.
If we want to consider where Apple's share price might be today if it just held that money instead, the clearest differences that we need to look at are these: Apple would have had an additional 2.5 billion shares outstanding and around an additional $320 billion on its books. (Comparing the effects of Apple's buybacks to some other action it might have taken - e.g., buying some other company or spending that money on developing a program to colonize Mars - would be more difficult. Suffice it to say, in hindsight it would be easy to come up with something else specific Apple could have bought that would have resulted in greater value creation.)
So how to consider those differences? The question would be, how differently would the market value Apple if it had another $320 billion on its books? $200 billion more? $300 billion more? $400 billion more? Given the dilution 2.5 billion additional outstanding shares would represent, and the current share price of over $327, the market would have to value Apple more than $800 billion higher (at a market cap above $2.2 trillion) - based on it having around $320 billion more on the books - in order for the share price to be the same. I don't think the market would do that. Assuming the market would value the $320 billion at 1-to-1 on top of what the market current values Apple at, the share price would be about $255. So I'd estimate the share buybacks have effectively added something like $70 to Apple's current share price. Those buybacks have concentrated Apple's market value gain to a smaller number of shares, taking advantage of the market having undervalued Apple for some long. This is a textbook case for when large share buybacks make sense and add value for shareholders.
Of course, we can't know the effects of a counterfactual for certain - it's a counterfactual after all. But in some cases we can get a pretty good idea and have considerable confidence about what might have happened had one thing changed.
Another way to consider Apple's share buybacks is this. Every dollar Apple has spent on buying AAPL shares has on average seen a return, based on the current share price, of about 33% per year. That's over an 8-year period and with over $300 billion spent. If a hedge-fund saw those kinds of returns, based on the value of the shares it currently held, we'd think that was pretty impressive. Or course we could look back and pick some stocks which would have, had Apple bought them instead, increased in value even more. But 30+% average annual gains? Not bad.
And to be clear, Apple could if it wanted to reissue those 2.5 billion shares and sell them. Even if it could only get, on average, half of the current share price for them, it would be nearly $90 billion ahead - i.e., it would have nearly $90 billion more in cash than it would have had it not bought shares back. At an average price of $250 per share, Apple would still be about $300 billion ahead.
I'm generally not a fan of returning capital to shareholders. Doing so is inconsistent with my big picture philosophy about equity investment - i.e., why I would choose to invest in equity in companies. But in some circumstances it makes since for companies to return capital. They've, e.g., made so much money that they can't foresee an operational use for much of that money, and they aren't interested in large acquisitions. At some point capital should be returned rather than just left to sit on the company's books, growing into a bigger and bigger pile, ad infinitum. Apple reached that point some years ago and started returning capital through dividends and, to a greater extent, through buybacks. From my perspective, buybacks are preferable - particularly when we're talking about large amounts of capital being returned. It gives the shareholders more flexibility when it comes to tax liability and allows individual shareholders to, if they want, achieve the same result as if they'd been paid a dividend instead. It doesn't work the same way in reverse. Buybacks are also better for rewarding ongoing shareholders.
As I said, I'm not generally a fan of public corporations returning capital to shareholders. But there has to be the prospect that some day they might, or else there's not much reason (outside of special cases) to own them - i.e., not much reason to invest in them and provide them with the capital they need to develop. If there was no prospect that corporations would return capital to shareholders, their share prices generally wouldn't increase as they do even if the businesses were successful.
With share buybacks, you have the option to have the effects of buybacks or the effects of paid dividends. With dividends, you don't have the option - the choice is made for you.
When Apple buys back and retires shares, it is effectively buying more Apple for its existing shareholders. If you've held Apple over the last 8 years, you now own 57% more of Apple than you would have had Apple not bought back shares. The share count is the same, but the meaning (and value) of those shares is different.
If at any point, instead of owning more Apple, you'd prefer to have cash you can sell a portion of your shares equal to the effective increase in ownership the buybacks have created. Then you'd effectively have a cash dividend and maintain the same ownership of Apple. You could use that money to buy shares of other companies if you want, just as you could if Apple had paid a dividend instead of buying back shares. The option is yours; you get to choose the timing of the tax liability. If Apple pays dividends and I'd prefer more ownership of Apple to the cash, I can't effectively undo what Apple did and have my preference. The payment of the dividends chooses the timing of the tax liability for me.
There is at best circumstantial evidence, and yes I recognize it, but that becomes questionably reliable when you compare it to the rise in stock value of the other FAANGS, some of whom are not repurchasing their shares yet have seen their share price soar alongside Apple. FWIW I see this market as a mirror of the 80's and 90's Bull markets when you could throw darts at a stock chart and pick a winner, but that's just my own personal observation.
IMO the stock repurchase program it seems to have been designed by and intended to benefit a rather narrow albeit wealthy group of investors and stockholders, not that I particularly care if that's what they want to do. I have no dog in the fight and own no Apple stock.
The nature of counterfactuals is that you can't prove their effects. They didn't happen, so theirs no evidence from them; that's the point. But we do this all the time - based on your understandings of how things work and what evidence we have from the actual reality we're in (i.e. not the counterfactual one), we conclude (and sometimes act accordingly) what the effects of a counterfactual would have been. Sometimes they're easy to confidently assess, sometimes they aren't.
As to your last point, yes - the buybacks were intended to benefit Apple shareholders. That's the (not-so) narrow group directly affected. Or course, many others are indirectly affected. But that's much the point of equity ownership, to make money off of your investment. And to that end, Apple has been returning capital to shareholders in one of the limited ways that it can.
That said, the best way we can analyze the effects on share price of Apple's buybacks is the one I've walked though a few times: To consider what the share price might have been had Apple not done the buybacks. I'm comparing to the situation where the only thing different is that Apple didn't buy back shares, it just held onto that cash as it had been doing before. As I pointed out, comparing to some other possibility - e.g., Apple having instead spent that money to develop a Mars colonization program - would be more difficult.
So what would be different if Apple had just kept that cash? The things we can see quite clearly are these: Apple would have an additional 2.5 billion shares outstanding and it would have something like $320 billion more. From there the all-other-things-being-equal comparison is pretty simple. With an additional 2.5 billion shares outstanding, Apple's market cap would need to be $800+ billion higher than it is now in order for the share price to be what it is now. What would justify that higher valuation? Apple would have an extra $320 billion in net-cash. I can confidently conclude that the market would not, based on that additional net-cash, value Apple more than $800 billion higher than it does now.
Again, no one can prove that because it's a counterfactual. But that doesn't mean that, in some cases, we don't have enough information and understanding to be pretty confident.
I'm a Redskins fan. I can confidently say that had Alex Smith not had his leg broken in 2018, they still wouldn't have won the Super Bowl this past year. I can't prove that, of course. But I don't think I'd get much argument on the issue from other Redskins fans.
I'm not at all claiming SOMETHING positive may have come from the repurchase program. I'm challenging you for proof of the effectiveness you claim is so clear and obvious As is, it is just as likely that the effort has been largely ineffective and returning excess cash to the investors via direct distribution would be the better way of seeing investors were rewarded.
I've read various articles before both recent and old, some promoting stock repurchase programs where the company retains the stock, others where they do not, and still others claiming dividends are the proper way. None of the ones promoting repurchase programs address the wisdom of doing so in a Bull Market which we've had for several years now.
You on the other hand say "I think a case can be made that Apple's buybacks over the last 8 years, considered collectively, represent one of the greatest financial moves we've ever see(n). Those buybacks have created a tremendous amount of wealth for its shareholders... in Apple's class (sic), the positive effect on share price of having bought back all those shares - at such a relatively low share price - is pretty clear."
IMO it is not at all clear and I would tend to agree with some other Apple stockholders posting here, that in today's' market conditions which have existed for some time now higher dividends would be the more equitable, efficient, and measurable method of distributing excessive cash. "Trust me, repurchase works," isn't the same as a check in hand especially if holding that Apple stock for retirement when any effect from the program has long since dissipated.
What I've done is assess the likelihood of what the case would be in that counterfactual. And I've provided the basis of that assessment numerous times. We do that kind of thing quite often. Much of our decision making as humans is based on our assessments of the affects of things as compared to counterfactuals. Sometimes we can't know with much certainty. Sometimes we can. In this case it's pretty clear that all-other-things-being equal, the comparison between Apple having done the buybacks and Apple still having that cash strongly suggests that the share price has benefitted from the buybacks. I've provided the simple math which supports that assertion.
That said, I've not been arguing that share repurchases are beneficial in general. Studies or commentary regarding the merits of buybacks in general don't address whether Apple's buybacks in particular have had a given effect. Of course some buybacks have been good in certain ways while others have been bad in those ways. Some buybacks are done for what I'd call wrong reasons - e.g., to short-term prop up the price of shares of a company that's business operations aren't performing well. As I indicated, more than anything, share buybacks tend to concentrate future share price movements.
As for dividends, I've also commented on why I prefer buybacks to dividends. Others are, of course, free to have a different preference. But buybacks provide for flexibility to shareholders when it comes to tax liability and - if we're comparing to a large, special dividend meant to return a lot of capital quickly - buybacks more-so reward ongoing shareholders.