“Corporate titans such as Apple and Walmart are under attack for buying back billions of dollars in stock while supposedly skimping on investment, but evidently the critics have it all wrong: The companies that buy back the most stock also invest the most in the future,” Jeffry Bartash writes for MarketWatch. “Apple announced plans last spring to buy back $100 billion in stock, but it also invested almost $17 billion in 2018 and it plans to invest $14 billion in 2019.”
“The biggest corporate tax cuts under President Trump in 31 years certainly helped, Cicione said, but he pointed out the surge in stock buybacks preceded them. Cicione said the largest and most successful American companies have managed to boost what is known as free cash flow, the difference between what a company receives and pays in cash, even faster over the past few years due to rising sales and sound management. That’s allowed them to give money back to shareholders and to increase investment.”
“Critics don’t see it that way… Earlier this month Democratic presidential contender Bernie Sanders and Senate Minority Leader Chuck Schumer said they would offer a proposal to sharply restrict stock buybacks unless companies invest more, especially in worker pay and benefits,” Bartash writes. “[Yet] hourly wages and total compensation for all American workers are growing more than 3% a year — the fastest rate in a decade.”
“If companies continue to generate huge amounts of extra cash, he said, they’ll simply shift from buying back stock to giving shareholders bigger annual dividends or special onetime dividends,” Bartash writes. “‘If companies generate so much cash, they will find other ways to return it to shareholders,’ he said.”
Read more in the full article here.
MacDailyNews Take: While we’d certainly like to see more in the way of dividends for AAPL shareholders, we’d rather see Apple to continue to efficiently reduce the number of outstanding AAPL shares which, over time, generally drives the share price higher. That said, we do expect Apple to raise the dividend for shareholders later this spring.
Interns: Roll out the barrel! Cheers, everyone!
SEE ALSO:
How Apple benefited from 2018’s U.S. Tax Cuts and Jobs Act – January 23, 2019
U.S. companies repatriated over half a trillion dollars in 2018 – December 31, 2018
Apple gives employees $2,500 bonuses after President Trump signed the GOP’s Tax Cuts and Jobs Act – January 17, 2018
Looks like Apple is bringing nearly all of its $250 billion foreign cash back home to America – January 17, 2018
Apple plans to add $350 billion to U.S. economy and create over 20,000 new jobs over next 5 years, pay $38 billion in repatriated taxes, the largest ever made – January 17, 2018
Apple expected to issue less debt in 2018 now that President Trump has signed the Tax Cuts and Jobs Act – January 16, 2018
U.S Treasury: 90% of U.S. workers likely to see more money in take-home pay next month – January 13, 2018
U.S. again assumes throne as world’s most competitive economy; first time since 2008 – October 17, 2018
U.S. worker pay rate hits highest level since 2008 – July 31, 2018
Apple expected to repatriate $214 billion to the U.S.; expect increased buybacks and dividends, not big acquisitions – December 22, 2017
Congressional Republicans deliver epic overhaul of U.S. tax laws to President Donald Trump – December 20, 2017<
When the new socialist left starts telling stockholders what they can and can’t do with their money, a shudder goes thru my body. If I want to buy out my fellow shareholders, as happens countlessly in private companies, it should be none of the government’s concern.
As an artist, I know full well that real artists ship. I’m full of ship!
Amazon is constantly praised, not for buying back stock, but for reinvesting that money into their own business and making acquisitions to expand their business. That’s why Amazon is valued far higher by Wall Street than Apple will ever be. High growth doesn’t come from stock buybacks. It comes by way of growing revenue streams. Apparently, Apple isn’t growing its business enough to satisfy investors or critics. Basically, Apple is still trying to squeeze more revenue out of the iPhone despite the total saturation of the high-end smartphone market. Stock buybacks isn’t going to help that problem. To me, it seems as though Apple should be making acquisitions of new businesses to offset declining sales of iPhones. I’m basing this on all the rumors of huge declines of iPhone sales in China.
Apple is said to be the no-growth king of tech companies and that’s not a good thing for loyal shareholders to hear. Meanwhile, Microsoft is running circles around Apple when it comes to value and growth potential. What’s wrong with this picture. It appears Tim Cook isn’t doing what’s necessary to keep Apple’s value from falling.
Yes, AMZN gets high praise – but its not for their stock buybacks.
Its more on how they’ve been a disruptor to conventional Brick & Mortar, and doing so in a fashion which has very much limited their worker costs, both in the near term and long.
Near term has mostly been though being very much anti-union and only really increasing pay when they had no other choice. For the longer term, they’re investing extensively in automation in ways which will keep their future labor costs from growing. The net result of this is that the market sees a company that’s able to grow without the traditional linear increase in staffing levels and the costs thereof.
In the meantime, Bartash’s noting that 3% raises are “the fastest rate in a decade” is merely an attempt to whitewash with optimism that isn’t merited. Sure, there’s been a bump up in gross pay but most of the increase in compensation went out in increased healthcare payments (including on the “invisible” employer’s portion). This is why consumer debt is up 5% as well as why the “Trump Bump” in Consumer Confidence since NOV 2016 has been completely wiped out in the past two months thanks largely due to the turmoil from the Fed Shutdown.
To a large degree, the public is trying to convince themselves that they’re doing better because they hear reports that the Stock Market is up…but this is largely a ‘Tale of Two Cities’.
Apple buys back more shares in a month than Amazon has bought back in 5 years false equivalency on your part. Amazon is a Ponzi scheme.
Apple stock buy back is a sham. You don’t split 7-1 while you’re buying stock back.
Buy backs are not a sham and make some sense from a stockholder perspective.
The idea of a buyback is it does very little to change the market value of a company, but after that buyback, by having significantly reduced the number of outstanding shares, each share holder now owns a significantly greater percentage of the company with that unchanged market value.
All other things being equal, that increase in fair value of each share along with upside pressure on stock price at the time of purchase should cause a significant increase in price of each share.
A benefit to stock holders
The other issue in question is that buybacks do very little in the way of increasing jobs, as additional investment would. They do not
It’s a scam buybacks have done nothing, money down drain, Apple should have raised the dividend to 1 dollar a share and call it a day, if you a long Apple you will by more if not so what.
Apple’s executives issue themselves options and then use cash to buy back stock, drive up the stock price, and put their options “in the money” rather than paying dividends to existing shareholders or, more importantly, putting the cash to work creating new products or markets.
The later would require the executives to work harder for their money and produce a good result. Much easier to do buybacks to enrich themselves.
What sad is a lot of investment people, are happy with the money, going down the buyback drain instead of going into their pockets in the form of a higher dividend.