“Thanks in part to President Donald Trump’s tax reform which cut the corporate tax rate to 21% from 35%, companies listed in the S&P 500 Index boosted stock buybacks, setting a new record for the group,” Donna Fuscaldo reports for Investopedia.
Apple Inc. “has a massive amount of cash, standing at $267.2 billion as of the end of the March quarter,” Fuscaldo reports. “Before President Trump signed tax reform into law much of that cash was held overseas and would have been repatriated at a high tax rate. But tax reform gives companies a break and thus the record stock buyback program.”
Read more in the full article here.
“First-quarter stock buybacks among S&P 500 companies set a record, boosted by strong activity in information technology, healthcare and financials,” Lawrence C. Strauss reports or Barron’s. “In all, S&P 500 companies repurchased $189.1 billion of shares in the first quarter, surpassing the previous record, set in the third quarter of 2007, by nearly 10%, according to S&P Dow Jones Indices.”
“The 20 companies in the index that bought back the most stock accounted for nearly half of all the repurchases,” Strauss reports. “Led by Apple, the tech sector accounted for about one-third of all buybacks, or $63.4 billion. The health-care sector came in second at $35.6 billion, followed closely by financials at $33.8 billion.”
“Apple alone repurchased $22.8 billion of its shares, besting its previous record of $18 billion set four years earlier,” Strauss reports. “It was the greatest quarterly volume ever for any company in the index.”
Read more in the full article here.
MacDailyNews Take:
The huge buyback this past quarter was NOT due to the reduction in the ongoing tax rate from 35% to 21%. It was due to the fact that there was a one time reduction in the tax rate to 15% for repatriated cash (and the fact that even if you didn’t bring that cash into the U.S. the company still had to pay that 15% tax, so why not bring it back in?).
But, what has that huge buyback done for the average or small investor? Virtually nothing. Virtually all the analysts agree that only a very small fraction of the rise in AAPL has been due to buybacks.
Apple would have been much smarter to have taken a small fraction of that buyback money and invested in Apple’s product development. With proper leadership and a little of the buyback money we’d have had a new Mac Pro over a year ago. We’d have up to date Mac portables. (You only have to look at Windows based startups such as Hauwei to see that Apple has fallen way behind in an area that Apple virtually owned in the past few years.) Hell, we might even have an up to date Mac mini.
And, for a tiny sliver of those buyback dollars Apple could have kept up to date such bedrock devices at the Airport line of products.
Sure, Apple, keep buying back stock. Make Wall Street your best friend. Forget about those of us who have been stalwart proponents for decades. We’re just loyal customers. Why should we matter when compared to Wall Street?
Exactly.
Stock buybacks are a huge waste of money and do not significantly increase shareholder value.
Wall Street loves them because of the fees they get processing the transactions. Apple could do better things with the money.
Shadowself, I agree wholeheartedly with your assertion regarding the impact of repatriated cash. That was clearly the driver for increased buybacks.
But I differ with both you and (especially) DavGreg when it comes to the merits of stock buybacks. Under the right circumstances, stock buybacks make a lot of sense. And buybacks, unlike dividends, do not impose a tax impact on investors unless and until they choose to sell stock. Buybacks may not always be good, but they are certainly not always a “huge waste of money” as DavGreg asserts on a frequent basis.
One more thing…Apple has a large R&D budget. Apple’s R&D budget is much larger than it was in the early to mid-2000s when Apple developed the iPhone and iPad. So money is not the primary issue at the heart of Apple’s product lineup. That is a management and strategy issue.
They make no sense Long Apple.
The worst part is that the middle class taxpayer is on the hook for this giant stock buyback that only helps Warren Buffet. These oligarchs are laughing at the repuglican baby caging, idiots that cheers this on. Just a giant wealth transfer from everyday working people that will only further degrade our way of life. Where does that money come from? Schools, roads, healthcare, transportation. What a bunch of ignorant, sister-fingering, causing bucking morons.
The lower and middle class will end up paying for this tax “reform.” While there are some aspects of the new tax law that make some sense, I despise the fact that it leverages increased deficit spending to compensate for the wealth transfer to the wealthy. As in the Reagan and Bush Administrations, then massive tax cut will be followed by tax increases as the federal deficit balloons. And, also consistent with the experience in those previous Administrations, the revenue reductions resulting from the tax cut will *not* be offset (or more than offset, as the GOP often claims) by growth. The tax rates were already in a range to render the growth effect modest, at best.
I find the rest of your post rather boorish. You can disagree with people without resorting to childish name-calling.
I see MDN had no comment.