Apple expected to boost share buybacks and dividends after history-making results

“Apple Inc’s blockbuster results and a ballooning cash pile may prompt the company to boost share buybacks and dividends this year, with some analysts expecting the iPhone maker to return more than $200 billion to investors,” Tenzin Pema and Abhirup Roy report for Reuters. “”

“The company posted the biggest ever quarterly profit reported by a public corporation,” Pema and Roy report. “‘We had to increase our cell widths and chart heights after Apple’s blow-out December-quarter print,’ RBC Capital Markets analysts wrote, raising their price target to $130 from $123. At least 13 brokerages raised their price targets on the stock.”

“Apple said last April it would return more than $130 billion to shareholders by the end of 2015. The company is due to update its capital return program in April,” Pema and Roy report. “Analysts also expect Apple to continue to benefit from growth in China and a surge in new customers, including those making the switch to Apple from smartphones using Google Inc’s Android software.”

Read more in the full article here.

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5 Comments

  1. I’d prefer if Apple decreases the amount available for buybacks and increases the dividends because I feel I’m getting more out of the dividends than the buybacks. Every quarter I see and touch the money from the dividends.

    I don’t know exactly how many shares Apple intends to repurchase and what good it is doing if Wall Street still believes Apple stock is overvalued. Those buybacks don’t seem to make Apple’s share price rise much faster if that is the purpose of those buybacks. I’m basically saying I don’t understand what those buybacks are achieving for me as a shareholder.

    1. Personally I agree that dividends generate real returns for me and I automatically reinvest in the stock. Since the stock is in a 401k account there is no tax liability yet.
      Buybacks have a less obvious effect. To some degree buybacks are necessary to counteract the options given to employees and prevent further dilution of the stock.
      Reducing the number of outstanding shares by additional buybacks has several effects. Each share is potentially worth more and can result in an increased share price and the act of the buyback will tend to increase stock price. We probably saw some of that when Apple reached their lows in 2013/14.
      Reducing the number of outstanding shares also lowers to total cost of providing dividends. For Apple this is likely the driving force for continuing buybacks. They even save money buy borrowing cash for the buyback because the interest is less than the money they save in lower dividend cost.
      Again personally I prefer dividends and hope they increase the dollar value per share in April. Given the current results I fully expect that.

    2. Let’s do a reality check: you get a few percent in dividends per year and a stock buy back will reduce the number of stock units available making them more scarce and driving up the price towards $200. Which do you think will make you more money?

      Supply and demand.

      1. It’s called hedging your bets. Dividends provide real income that can be reinvested. Hence your holdings increase in number.
        Share prices can definitely go up as a result of buybacks but a reduction of 1-2% outstanding shares will not have a significant difference per quarter. In total Apple have retired about 8% of shares which is quite a lot but is the effect really noticed by the market.
        It seems clear to me that Apple’s buyback helped spur the stock from its doldrums of ~$60. But that also coincided with several consecutive record breaking quarters so the full impact is hard to decide.
        I love when people quote stock market lessons like that. They spout these rules without any understanding of the context of the stock. And I seriously doubt that Apple will reach $200 any time soon. If we are lucky it will go up to $130 with the current good performance and Apple watch hype.

  2. I agree with doggonetoo. I’m a 14 year long, and getting cash dividends really is like getting “paid to wait” while AAPL price increases. Buying back stock is still a good idea.

    In addition to countering dilution and increasing EPS, buying back stock serves as a market-maker, providing more consistent liquidity.

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