“Apple might face a lot of headwinds in the current economy, but the company is perfectly positioned for weaker stock prices,” Stone Fox Capital writes for Seeking Alpha. “The tech giant chose to make a minimal dividend hike this year in order to continue focusing on stock buybacks in a perfect move to highlight the minimal impact of dividends on the total return of the stock.”
“This year, the company surprised the market by cutting back on the annual dividend hike,” Stone Fox Capital writes. “The quarterly dividend for the next year was boosted to $0.77, up or $0.04 or ~5%.”
“The annual dividend hikes of the last 5 years were all over 7% with at least a 10% hike each year beginning in 2015,” Stone Fox Capital writes. “One big reason to favor stock buybacks as the capital return avenue of choice over dividends is the volatility of the stock. Apple dipped from over $230 last year to a low of $142 by December as evidence of how having more dry powder to repurchase shares is beneficial.”
“In addition, Apple faces all types of threats to the business model from consumer lawsuits over App Store charges to high tariffs on Chinese goods that will make the stock swing wildly,” Stone Fox Capital writes. “The best way to counter the volatility of the stock is to use the weakness to reward shareholders via reduced share counts and higher ownership positions… The key investor takeaway is that the small dividend hike is a brilliant move to focus capital returns on stock buybacks.”
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MacDailyNews Take: Hard cash is nice, but Apple having the ability to bolster the share price, if needed, through rollercoaster times is more valuable for longterm shareholders.