Yesterday’s “earnings report marks the point at which Apple is officially no longer a high-growth tech stock, valued on its monster potential. Instead, it has become a cash cow, valued on its ability to pump hundreds of billions of dollars into its shareholders’ pockets,” Felix Salmon writes for Reuters. “That’s the main lesson from the big news of the day, which is that Apple is going to return $100 billion to its shareholders by the end of 2015. By comparison, Apple closed Tuesday with a market capitalization of $380 billion. And its $145 billion cash pile isn’t going to get any smaller: the newly-announced program merely brings its dividend and share-repurchase expenditures up to roughly the level of its current free cash flow. Apple will still have more than enough money to invest as much money as it likes in anything it likes.”
“Apple says that its new capital-return scheme ‘translates to an average rate of $30 billion per year from the time of the first dividend payment in August 2012 through December 2015’; it’s pretty hard to imagine that number falling thereafter,” Salmon writes. “If you assume fungibility of dividends and share repurchases, then you can express that number as an effective dividend yield: a $30 billion dividend, divided by a $400 billion market cap, works out to a yield of a whopping 7.5%.”
Much more in the full article here.
MacDailyNews Take: Apple is no longer a high-growth tech stock if you think Tim Cook, Jony Ive and the rest of Apple Inc. are incompetents and/or that Steve Jobs left his left’s work high and dry. Neither idea seems plausible to us.
Watch and see.
[Thanks to MacDailyNews Reader “Brian” for the heads up.]
Related articles:
Apple: What’s eating America’s Favorite Tech Company? – April 24, 2013
Pressure builds on Apple to make a move – April 24, 2013
Apple just changed everything, again – April 24, 2013
Apple preparing to unleash a blizzard of new products, says source – April 24, 2013
Why Apple’s Q213 earnings make it a fist-pounding buy – April 23, 2013
Piper Jaffray’s Munster: Apple’s going into a good year – April 23, 2013
Apple opens bank vault to dole out $100 billion to shareholders; $60 billion in buybacks the largest in history – April 23, 2013
Debt-free Apple plans to borrow to finance massive capital-return program – April 23, 2013
Apple beats Street on EPS and revenue; ups quarterly dividend by 15%; ups buybacks to $60 billion – April 23, 2013
Another vain attempt to squeeze Apple into some box that they have models for. Prepare for more years if Apple missing or exceeding analysts expectations!
A nonsense.
Apple is still spending massive amounts on R&D (over $10 million a day) and the $100 billion that everybody is focussing on will be returned to shareholders over the next 11 quarters, which means around $9.1 billion per quarter.
Given that Apple will probably pull in around $40 billion in the remaining three quarters of this calendar year, the net cash-flow is probably still in Apple’s favour to the tune of around $50 billion by the end of 2015, which means the company will still have around $180 billion in cash and short-term investments.
What this all proves is that people love to find a reason to complain: they used to complain that Apple was hoarding its cash. Now they theorise that the company is falling apart and that its glory days are in the past.
It’s all talk for the sake of filling column inches.
‘….assume fungibility of dividends and share repurchases…’ What a COMPLETE barrel of crap. NONE of the $ 60 billion spent fopr ‘share re-purchase’ puts a single dime in my pocket – NOTHING. It feeds greedy institutions and Wally Street traders… For the little guy – NADA… If you believe anything else, you’re an idiot.
Winski, think again. The purpose of share re-purchases by Apple is to take shares of its stock off the market. If you own shares of Apple stock as I do, fewer shares outstanding means that the value of every share of stock I own increases in commensurate fashion.
Further, no less than Warren Buffett urged Tim Cook to do this very thing. Buffett reasoned (and it’s an argument supported by very intelligent financial minds) that the best way for Apple to use its cash is to buy stock back. He explained that it’s a great return on investment when you can buy stock for 70 to 80 cents for every dollar spent. And as I noted, every remaining share on the market (that is, stock owned by people like you and me) becomes more valuable.
When you add that to an increased divided, it means that you can earn a 7.5% dividend return on every Apple share. Ask yourself what return you would get on a savings account or a CD at the moment. In addition, if you reinvest your Apple shares, that 7.5% combined dividend (and stock repurchase) dividend will compound significantly over time. Given that most stock dividends pay out 2 perhaps 3 percent by comparison, it means that you can double your return on Apple stock rapidly.
If you are a long-term holder of stocks, a larger dividend can earn you dramatically more in less time. I hope you understand the power of compounding. If you don’t, take the time to read up on it. The wealthiest people in the world got that way because of compounding. And you can dramatically improve your life if you employ it.
So please re-read the article. Read what Warren Buffett has to say about compounding (I also recommend “The Davis Dynasty” a book about Shelby Davis, one of the most successful investors in history, who made a fortune on compounding). I think that in the long term, you can benefit more than you may understand.
Of course it’s a high grower but not as high as before. I mean this is what the street have been whining about for some time. Apple is so big it can’t grow as fast as it did before on a percentage basis even if it sells more iPhones.