“Apple repurchased a record $18 billion worth of its own stock during the three months of 2014, making it the ‘poster child’ for an ongoing trend in Corporate America, according to a report released Wednesday,” Ben Rooney reports for CNNMoney.
“The companies in the S&P 500 spent a combined $159.3 billion to buy back their own stock stock during the first quarter of 2014, according to preliminary figures from S&P Dow Jones Indices. That’s up 59% from the same period 2013,” Rooney reports. “It was also $30 billion more than what those companies spent in the fourth quarter.”
“By reducing the number of shares outstanding, companies are able to report higher earnings per share because profits are spread among fewer shareholders,” Rooney reports. “The iPhone maker’s buybacks reduced the company’s overall share count by 7% over the past 12 months. That boosted earnings per share by 7% in the first quarter… Apple announced plans in April to increase its share repurchase program to $130 billion, up from $100 billion. The company also hiked its dividend by 8% to $3.29 per quarter, up 24 cents from the previous $3.05.”
Read more in the full article here.
Related article:
Apple CEO Cook defies naysayers with sales surge; boosts buyback, splits stock 7-for-1 – April 24, 2014
This is sign of a company that understands its duty to its shareholders. They are the owners of the company; they are not rubes to be fleeced for cash to burn.
Stock buybacks make the most sense when the company buying back its own stock does so at a “discount.” In other words, Apple did the previous stock buybacks at a time when AAPL was considered highly undervalued. It was almost a “fire sale” OF THE COMPANY that never needs to have fire sales.
While AAPL is still undervalued, as it approaches its previous all-time high, it is no longer a bargain, like it was less than a year ago at a split adjusted $55.55. If AAPL drops significantly, Apple may do more stock buybacks. If it goes up from here, don’t count on Apple to lead the next “buyback binge.”
Just don’t forget they know more than we do about the rest of the year, and beyond. The prices we’re seeing today may prove to be wildly undervalued still.
That may be true. However, for Apple, the point of doing stock buybacks is to move the stock price higher when AAPL is heading generally downward or stagnating. When Apple takes shares “off the market” with a buyback, the remaining shares “on the market” become more valuable (because each outstanding share represents a greater portion of Apple ownership).
If the momentum is positive (like right now), and AAPL is heading generally higher, Apple is not doing any stock buybacks. There is no point in spending tens of billions of dollars, when AAPL shares are already “in demand” whether the current price (and “what Apple knows”) makes AAPL undervalued or not.
I’ve read either/or arguments about Apple’s incentives, but perhaps Apple sees multiple benefits to the buybacks.
Sorry ken, but I do not think Cook is worried about the price of Apple stock and doing buybacks just to raise that price.
When Apple buys back its shares, it can sell them again later, at a much higher price. Just saying.
I think one thing is clear – today’s price is not the “right” price. Either great things are coming, which drive the price higher, or they are not coming, in which case the stock will drop. The one sure thing is that it won’t stay here.
Before the iPhone 5 was launched in Sep 2012, Apple knew that great things were coming, but that didn’t stop the stock price tumbling.
The stock market is not a rational operation, so there is no point in applying logic to meaningfully predict it’s movements.
Like what? A new iPhone, a new iPad? Not exactly unexpected.