“Apple’s cash horde is the stuff that legends are made of, particularly before the Mac maker initiated its capital return program and its money mountain never seemed to stop climbing higher,” Evan Niu writes for The Motley Fool. “Apple has boosted its capital return program twice now, with most of the increases being dedicated toward share repurchases. Yet, Apple can’t seem to give its cash to shareholders fast enough.”
“The capital return program has now nearly tripled over the course of 2 years. That’s what I call aggressive. At $130 billion, Apple’s program is larger than many mega cap stocks. Theoretically, you’d think that such a massive program would help Apple reduce its overall cash position as it works to give as much of that back as possible. After all, that was sort of the idea in the first place,” Niu writes. “You’d be wrong.”
“Apple simply generates cash faster than it can give it back. Back when the capital return program kicked off in Q4 2012, Apple had a total of $121.3 billion in cash. After factoring in the two separate bond offerings over the past two years, Apple’s current net cash position is $141.2 billion,” Niu writes. “If you add long-term debt to net cash, you get Apple’s gross cash position of nearly $165 billion. Apple’s net cash position is what’s important here though, since Apple’s use of debt is merely a way to avoid repatriation. Net cash has still increased by nearly $20 billion since the program started… Should Apple be even more aggressive with returning cash?”
Read more in the full article here.
[Thanks to MacDailyNews Reader “Arline M.” for the heads up.]
No.
I like the cash back and buying back AAPL shares. But, be strategic too. Start buying up and locking up raw ingredients and part supplies so you can starve out Samsung and the others. You only have to remove a few links to break a supply chain.
“Think Different” Tim and the Apple board.
Apple should start offering high interest loans to Microsoft and google. Both really need cash right now and would be a lot better for them than panic borrowing from the Korean mafia.
More ranting by someone who cannot see past marketshare??
So how about spending more of that cash supporting Pro’s like a more complete FCP X and better support of industry codecs and the delivery of the long awaited Phenomenon, the replacement for Shake. (Oh and an iWorks on steroids that truly kicks Microsoft Office hard in the nuts.) I hate seeng long time industry Mac users I know making noises about going to Windows and Premiere Pro.
That’s hoard, not horde, unless Genghis Khan has joined the Motley Fool.
Funny!
Horde = Pile
Horde = Mass
Horde of money = Pile of money
Um, no.
Horde = large group of people
You got there just before I did. Spellcheck is only as good as the person who knows the meaning of homonyms. Maybe someday we’ll have context-aware spell checkers.
Horde is fine, but we all know that Apple has the Alliance
Increase the dividend. The only way to extract serious money from my AAPL stock art the moment is selling shares, and I hate to sell shares.
I have to pay taxes on dividends. If they buy back shares, the value of my stock increases but I get to choose when I sell them and pay the capital gains tax.
And I am in the exact opposite position.
“… before the Mac maker initiated its capital return program…”
“Apple has boosted its capital return program…”
“The capital return program has now nearly tripled over the course of 2 years.”
“…as it works to give as much of that back as possible.”
“Back when the capital return program kicked off in Q4 2012…”
“Should Apple be even more aggressive with returning cash?”
These statements are a significant part of what is inherently wrong with Wall Street these days. They seem to believe that Apple owes them something. They seem to believe that Apple needs to RETURN something to them.
What percentage of stockholders actually paid money directly to Apple for stock? If they never gave Apple any money, how can Apple even theoretically RETURN any money to them? The money these Wall Street types (and by proxy everyone who buys into their BS concept) was never theirs in the first place. There is, and never was, *anything* to RETURN to them.
This statement is one of the extremely few I’ve read over the past couple years that is actually correct.
“Yet, Apple can’t seem to give its cash to shareholders fast enough.”
Yes, Apple is GIVING a fraction of its profits to the stockholders. Yes, it is a gift. Apple is NOT RETURNING anything.
They ALL need to stop believing that Apple *owes* them something simply because they bought Apple stock on the open market.
It’s not a gift. Shareholders are OWNERS of the company.
Nope. Not even close.
Shareholders own shares issued by the company. That is not even close to owning the company itself. If you hold one million shares of Apple stock you cannot walk into Apple and demand anything. You are not an OWNER. You own shares that were issued by Apple. That’s all you own.
Apple’s book value could go up by a factor of 100 and the value of your shares could, in theory, at the same time go down by a factor of 100. (Though that’s virtually impossible as even the idiotic Wall Street types are not THAT stupid.) Thus the value of your ownership, the stock itself, went down by a factor of 100 while the real value of what you claim to own (but don’t) went up by a factor of 100. The two are not directly tied at all. You do not OWN Apple. There is no direct tie.
A share is a mythical, symbolic thing that can be bought and sold. If it is a public company, you can buy and sell those mythical items to others who believe they have value. Sometimes the company *gives* the holders of those shares money for being shareholders. It is a gift. It is not required by any law and is not money *returned* to those shareholders.
This is why some companies constantly lose money, but the stock value goes up, while others make huge profits and the stock value goes down.
Whether those shares give you any say at all in how the company is run (like an OWNER would) is 100% dependent upon the bylaws of how the company was set up. It is perfectly possible, and completely legal, for a company to be structured so that the stockholders have absolutely no say in how the company is run and give 100% of control of the company to the board.
Stockholders need to stop believing in the myth that they actually own the company. They don’t. They own shares issued by the company. That’s all.
Shadowself you clearly don’t know how stocks work. The stock is PURCHASED from Apple and sold through “retailers” . It gives you a part ownership in Apple. So yes you did give Apple money for your portion of ownership and yes that money you paid to Fidelity, Etrade, etc… did go to Apple sans commissions. It’s not a gift they are giving your share of profit due to your ownership in the company. Stocks are just not magical pieces of paper made up by stockbrokers and Apple gifts you money for buying the magical paper. So YES Apple owes me something as I’m a partial owner in Apple.
Sorry, no. It is YOU who show you clearly don’t know how the stock market works. Apple sold that stock into the public market long ago. Apple is now out-of-the-loop as far as a stock buyer giving money to Apple. If you buy Apple stock on the market today, Apple gets not one red cent of your money, not a penny.
Apple got its money from that stock when it was first sold into the market years ago. Apple, for at least a decade has only provided newly issued stock shares to employees and directors as either compensation or in bonuses, or as part of an acquisition, although acquisitions are usually done now for cash to avoid stock dilution.
The only entities getting YOUR money from an Apple purchase today are the shares’ previous owner, who may be an individual or financial organization such as CALPERS, who has elected to sell the shares they hold, a broker who takes a fixed or percentage fee, and the various taxing agencies. Apple gets NOTHING from the transaction.
To Apple, stockholders are merely a cost of doing business—a cost which has a say in who gets elected to the Board of Directors—and to which Apple must send money. In many ways, stockholders (I am one, as well as an Economist with a minor in Finance) are a pain-in-the-neck, only lower. They are one of the reasons some companies buy back their shares and return to private ownership, such as Dell did a couple of years ago.
Do you think that when you buy a 2001 Chevy from your next door neighbor for $5000, the neighbor send any of that five grand to General Motors? Of course not. . . and neither would you when years later you turn around and sell it to someone else. Dave, stock is no different. It’s owned, it’s sold. The only difference is that it has the potential to earn a dividend.
So, unless you are one of the very few who bought an initial public offering share, or bought any of the rare newly authorized shares that Apple, from time to time issued, you DID NOT “purchase from Apple” and the stock was not “sold through ‘retailers.'” The buyers are buying previously owned shares, ‘used’ shares, that are merely flowing through the market, with their exchange dis-associated from Apple, from a pool of shares being offered for sale by owners who are willing to sell, with the assistance of a “broker,” not a retailer, who arranges the transaction between the two, or more, of you for a small transaction fee. Apple neither knows, nor cares, about the transaction, until it is finished and you the shares are registered to you as a new owner. . . and Apple incurs a very minor cost for maintaining that stock registry so they can pay dividends and mail reports.
But the fact remains that I OWN a small fraction of the company, its assets, its retail stores, its goodwill, and its cash. That cash is mine. Some small fraction of it belongs to me because I am a partner in the company. I have implicitly given permission for the company to use MY money for other purposes by purchasing the stock, but I own a very real and tangible asset that amounts to whatever portion my few thousand shares comprises of the 6 Billion or so outstanding shares.
There have been quite a few articles on this over the past few years. As it turns out, the notion that shareholders own part of the company is a complete myth.
http://hbr.org/2010/04/the-myth-of-shareholder-capitalism/ar/1
What you actually own is a loose agreement that may, at the discretion of the directors, entitle you to a share of the company profits. But you do not own any piece of the company.
Zeke, unfortunately for those who believe this, none of it is true.
You most definitely do not own “a very real ant tangible asset.” You “own” something that is represented by bits on several thousand computers. Very likely you don’t even have physical stock certificates. If not, there is absolutely nothing physical that you own.
And, and you are most definitely NOT “a partner in the company”. None of that cash is actually yours. If it were, you literally could cash out (and every company that has stock issued would be at risk of stockholders coming in and demanding a fraction of the cash on hand).
Assume for a moment that Apple actually has $160 Billion of cash on hand. Also assume that you have 1 million shares of Apple’s out of about 6 billion issued shares. Then if you really did OWN that relative fraction of Apple’s cash you could go in and demand Apple give you about $26 million in cash. That relative fraction of the cash is really YOURS, right?
Wrong. You own absolutely none of that cash. NONE.
You own a mythical, abstract “object” that everyone agrees exists. That’s all you own. Also, it only exists as long as everyone agrees it exists. If some all powerful authority were to come in and claim it does not exist, then you’re screwed. You have nothing.
This is what has happened when some countries’ governments have nationalized whole industries — even those that have issued public stock with stockholders around the world. The countries declared that that stock had no value or control in the companies, the countries’ governments now owned the companies, and the countries’ governments now controlled those companies.
Also…
Swordmaker (love the handle)…
As is *often* (but not exclusively) the case, and likely happened with Apple (I haven’t researched it) an underwriting firm does the Initial Public Offering (IPO), not the company itself. The underwriting firm pays the company for 100% of the stock (minus various fees). That firm then owns 100% of the stock and arranges for it to be put onto the public market. The firm tries to estimate what the stock price will be once it is offered. If the firm pays the issuing company $10 a share and the offering goes at $20 a share the firm really makes out. Conversely, if the offering goes at $5 a share the firm loses its shirt. (I have heard of several IPOs where the price the underwriting firm pays to the issuing company a price floating to the price realized in the IPO, but I’ve never been involved in any.)
Thus in a typical case even in the Initial Public Offering, people buying the stock on the open market at the first moment it is offered to the public are not buying the stock from the issuing company. They are buying them from the underwriting firm.
That’s a nice fairy tale, but what I said still stands. I have voting rights about how the company operates, as does every other stock holder and partner. If we collectively decided that Apple should pay a $100B special dividend it would. The only reason I can’t demand my portion of Apple’s assets is that the shareholders have collectively and implicitly agreed to abide by the decisions of the board of directors. It is still very possible for the shareholders to propose a payout at the annual meeting and vote it in. In fact, if enough shares are voted on any issue, the stockholders can govern the company directly.
The fact that a company can be nationalized has no relevance in this discussion. The same thing can happen to real estate or gold bullion.
Very true about the underwriting. . . I was trying to simplify for clarity’s sake. However, once a company has gone through the Initial public offer and its stock is traded, the company can authorize and issue new share, diluting share that already exist, or sell those new shares into the market raising capital, thereby avoiding dilution. Some IPOs are handled by brokerages on a percentage basis, who, depending on the company being sold, offer the IPO to their preferred investment customers, or spread it out to other brokers. A lot of it depends on the Street buzz about the IPO.
You and MuppetGate are also correct about the fact that owning a stock in a company does not grant one a right to its assets. . . and you’re also right about that stock’s dependence on our mutual agreement on its safety and value, as well as the possibility of an authoritarian figure invalidating both its value and safety. I refer all three of you to what Obama did to the stockholders of General Motors and Chrysler a few years ago and quietly inquire what happened to their equity positions, investments, and guarantees of safety. . . including the preferred stock holders. Prima facie evidence of your point right here in the USA.
A. Increase buyback by 10-15 percent
B. Increase dividend by 5-10 percent
C. Special one time dividend – about $1 per share
D. Rinse and repeat as needed until cash is under control