“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.”
Read more in the full article here.
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.
Stop nickel and penny- ing us. Apple clearly needs a way to distribute the money, profit, it makes, dividends are a perfect way to do so. To that end all companies should pay to their owners 80% of the profits in the form of a dividend.
At that level of pay out, we can easily allow companies to pay no taxes. Stock prices would jet for those companies making money and for those that aren’t making money, well what would you do. No profit no dividend. This is way better then incurring debt. And for those that don’t want the dividend, fine, don’t take it. Those people could sign away the dividend to the company or they could buy more product from the company. Win win.
are you an idiot bob?
Jack : are u kidding? what a name by the way.
u must be in finance, banker, stock broker, …
only these types thinks the ceos, vps, board of directors, should be living off of the shareholders’ money. hey how this, “it’s the shareholders money”.
it makes sense to pay that money out to the shareholders. shareholders bought the shares to make money. the share price will be reflective of how much money the company is making. why should a company that has no profits have a high share price… speculation ? hahahaha suckers more like it.
why does it make sense to buy back shares to give the shareholders money. my plan drives the share price up and allows the shareholder to keep making money. you can imagine productively would go through the roof, why? because employees own shares and their shares could pay them a lot of money, all based on how well what they are doing, what they are doing. lol
banks can take 1%, 2%, 3% cause they loan so much, billions, for so long. individual shareholders may not have the opportunity to loan billions… lol
wake up, why shouldn’t you become a multimillionaire. why should a company just set on profits.
I prefer a larger dividend increase. I’ve been an AAPL shareholder since 1997 and have been through the ringer countless times, but I’m almost ready to get completely out of the market until the unstable, mobster, traitor is removed from the White House. This whipsaw volatility is too much.
Traitor? You’re not worried about how the left used our FBI, etc. to try and fix the election and someone from becoming president? Now they want us to become socialist!!
… the police departments, the fire departments, the military, the public libraries, the schools, etc?
Might THOSE be the socialist programs you are afraid of?
Fact is, the ‘Far Left’ Progressives just want us all to be nicer to each other – as the teachings of Christ dictate.
Jeez, PDXTROUBLE is a really unstable person.
… you LIKE the guy who shares Top Secret information with the top-ranked “Communist” nation in the world? The one Reagan attacked regularly, the one that has so often caused us to scamper to build a defense against their latest threat? You DO remember that they are the socialist thugs your Daddy warned you against, yeah?
I like splits! I went from 38 shares to 300 shares and from 2500 to 56700.
Well over 130,000 per year without selling any shares, and after tax as well.
The only issue with this argument is that the dividend is rather small. Apple could raise the dividend by 25 cents a quarter and it would cost them only $4.6B a year. Far less than the $75B they are using for buybacks.
I disagree with the article. There has never been any evidence at all that stock buybacks do anything other than to lose the money the company spends on them. These shares are retired, meaning that the company will be putting the latest $75 billion a hole with no bottom. It doesn’t stabilize the shares either. Think about it, the amount Apple is buying back, as a percentage is very small. At best, the shares will go up by that small percentage. But it doesn’t, not for more than a few days. Hedge funds, anticipating these buybacks buy shares before, and sell right after the announcement. Everyone else, buys right after the announcement, so when the shares drop back, they’ve got nothing to show for the investment.
Warren Buffet said that he likes sharebacks because if he has 5% of Apple, say, then he’ll be getting 6% without spending another penny. But it doesn’t mean the same thing for small investors. The percentage we have means nothing.
What could Apple have done with this latest $75 billion? Can anyone thing of anything, because I sure can.
Buybacks are theoretically plowing money back into the stock by reducing the number of outstanding shares.
Dividends are pulling money out of the stock by giving it directly to the shareholders.
Both are important but I would have preferred a more generous dividend hike.
Personally, I reinvest my dividends so am putting that cash back into the stock.
I LOVE the rise in small dividends my wife gives me nightly!
-wait…