Apple charms investors with record $110B stock buyback, dividend hike
Alongside disclosing its earnings for Q2 2024, Apple also announced that it is increasing the dividend it pays to shareholders by 4%, and is also buying back more stock in one program than ever before.
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During its quarterly earnings report, Apple's CFO Luca Maestri described "very high levels of customer satisfaction and loyalty," as reasons for undertaking the company's largest-ever stock buyback.
"Given our confidence in Apple's future and the value we see in our stock," he said in a statement, "our Board has authorized an additional $110 billion for share repurchases."
"We are also raising our quarterly dividend for the twelfth year in a row," he continued.
The 4% increase in the cash dividend of Apple's common stock means a rise to $0.25 per share. Shareholders who own stock as of May 13, 2024, will receive the dividend three days later on May 16.
Most recently, Apple has tended to buyback its stocks in the region of $90 billion each time. That's what it did in May 2023, and before that in April 2022.
From 2012 up to the end of 2022, Apple spent in excess of $572 billion on share buyback programs. In 2019, Tim Cook revealed that it was investor Warren Buffett who taught both him and Steve Jobs on the value of buying back shares.
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And before anyone gets excited about that "4% increase in the cash dividend," we're talking about a 1 penny increase here, and that increase is no different than previous increases, as per Apple's Dividend History here:
https://investor.apple.com/dividend-history/default.aspx
There are plenty of stocks that have high yields. Their problem is that their value does not grow.
I see Apple as a long term growth stock. Since I bought into the stock in the early naughties, the value has increased 42000%. That rescued my 401K for sure. I have started to divest out of Apple but still hold a good amount. The dividend is a bonus and by reinvesting it in AAPL I increase my holdings by 0.5-1% annually. So probably since 2012, the dividend has increased my stock by 10%.
It's the separation between 'making good products success will come' and 'make shareholders happy and get out in time before things get bad'.
So right now they have a good run, money is coming in, no crisis in sight. That would be the time to save up, pay up and make sure you've got resources should things turn bad. If Apple had worked in the 1980ties the way they do now, they would have gone bankcrupt in the 90'ies.
Still remember Steve Jobs from an Apple internal Comm-meeting in 2001, where he came up with exactly that point. Yes live is bad (2001-3 have been harsh times after the .com bust and 9/11), but Apple works its own buildings and is debt-free, so we still have room to play. Essentially betting the company thrice (iMac, iPod, iPhone), was what enabled Apple to come back from the crypt. If they were in debt working from a leased headquarter at that time, Apple would have been a blip in history.
But hey stripping a company of its resources has and puffers has been the way to ruin companies since the 80's, so sm
Cost of sales are down. So, Apple could improve their margin and income. At the same time, theire assets and liabilities are down. This leads to higher equity. Their FCF is stable and positive as always.
Given this fact, I understand why Apple takes the debt to buy back their stocks.
What Apple is doing is simple: Being cash neutral.
Apple would have no problem to have bigger cash reserves thanks to their enourmous FCF if Apple wanted to.
At this rate of buybacks, there would be no share left in 2050.
But all these buybacks and dividen payment work as long as Apple generates current or higher FCF.
What we see is Apple is betting on generating the current FCF for long term.
P.S.: Meanwhile, theire R&D expense is up QoQ and YoY.
As noted above, Apple does borrow, but that is done to avoid taxes from bringing home cash from overseas operations. The interest Apple pays on that debt service is far less than it would pay in taxes, so your scheme to retain cash to avoid incurring debt makes zero sense. Nor would it benefit shareholders since it would actually reduce net income and cash on hand.
Buybacks are also more beneficial to shareholders because dividends are taxed (and generally taxed as ordinary income). Capital gains taxes are generally lower than taxes on dividends, and the shareholder can plan sales to offset losses to minimize overall tax burden.
And what acquisitions would Apple make? Netflix? Disney? Tesla? Give me a break.
If you are long Apple the big gains came from the 2 to 1, 7 to 1, and 4 to 1 stock splits in recent times, it also helps to have everything paid off too (if you are retired), I do wish the dividend was at .35 a share but the upper gentry over the years flavor stock buybacks instead. Pre 1982 was best when it comes to stock buybacks the response after 1929 was the right one.
Is there no better use for $110 Billion than burning it? It's not "returning it to investors" in any quantifiable way, and the stock gets burned once repurchased. Poof!
They aren't alone in this either. Big US tech seems clueless about what to do with the (declared) $600 billion+ they hoard without a purpose. But Apple, along with the rest of the Gang of Five, wants to be thought of as caring companies trying to make the world a better place. This isn't it IMO.