Apple spends a record $23.8B buying back its own shares — and saves cash in the process

Dion Rabouin for Axios:

Apple again led S&P 500 companies in buybacks, spending a new record $23.8 billion in Q1, more than doubling its spend from the previous quarter, data from S&P Global shows.

Apple has long been a buyback behemoth. The company holds 8 of the 10 all-time records for quarterly buybacks, and has spent more than $75 billion on buybacks over just the past year.

It has spent $234.7 billion over the most recent 5-year period, and $284.3 billion over the last 10-year period.

Apple accounted for 23% of share buybacks made by the top 20 S&P 500 companies.

Conor Grant for The Hustle:

By buying back stocks, Apple reduces the number of shares on the market, increasing the value of its remaining shares.

It’s a cheaper way to pay shareholders than issuing dividends: Unlike regular dividends, Apple issues buybacks whenever it feels like it.

Plus, buybacks enable Apple to get rid of cash it would otherwise pay taxes on, boosting stock prices AND warding off the tax man.

MacDailyNews Take: These are mind-boggling numbers. Apple spent nearly a quarter of a trillion dollars on buybacks over the past 5 years!

18 Comments

  1. “By buying back stocks, Apple reduces the number of shares on the market, increasing the value of its remaining shares.” With regard to the second half of that statement, in a word, Bullshit. Apple’s buybacks have only marginally affected the share price–if it has affected it at all.

    If there were even close to a direct correlation, by Apple taking $284.3 billion in stock off the open market the perceived value of the stock should have been redistributed among the remaining stock shares (the original shares minus the $284.3 billion worth of stock shares). This should have raised the remaining per share price by a very noticeable amount. It has not.

    At about 862 million shares outstanding, a $284.3 billion buyback and redistribution of that value across the remaining shares in theory could amount to as much as $329 per remaining share. So why isn’t Apple’s share price hanging around $350 to $500 per remaining share? It’s simple, no matter what these pontificators want to spew forth, there is little correlation between Apple’s stock price before and after a buyback.

    Apple’s share price was affected more this morning by Sec. Mnuchin’s comments about a potential trade deal with China than the buybacks (even in total) have had. If the trade deal is realized this will have a positive long term effect on the share price of AAPL much greater than the buybacks. This just points up that there are many, many things that affect Apple’s stock price way, way more than the buybacks ever will.

    1. Over the past 4 years, Apple share price has increased in value by over 70%. This represents an annual growth of over 15%.

      During that same period time Apple’s annual profits have been stable at about $50B per year and the stock’s P/E ratio has remained fixed at between 12x-
      to 15x.

      It’s patently obvious that the increase in the value of Apple stock has been driven by the stock buybacks.

      The market has failed reward Apple’s massive success with a P/E ratio comparable to other tech giants, so Apple has decided to reward investors by sharing its gigantic profits with those who have held onto the stock. As an Apple shareholder, I’m super happy that Apple is using its massive profit engine to reliably increase the value of my investment by 15% per year, year after year.

      I don’t know of any other stock with a beta as low as APPL that is delivering consistent double digit annual share price growth. Do you?

      Go find a subject to comment on that you actually know something about.

    2. not really. a company buying back its on stock causes the value of the stock to be artificial, not determined by the public’s value. this buy back was a waste of money that should have been passed on to the stockholders as a dividend. the higher dividend the higher the stock price would have gone.

      it’s like a parent that buys the lemon aid from their own kids’ lemon aid stand. in this case the parents are really rich…

    3. “At about 862 million shares outstanding”

      I thought Apple had around 4.6 billion shares outstanding ?

      Yahoo Finance : “Shares outstanding 4.6 billion”
      Nasdaq : “Shares outstanding 4,601,075,000”

    4. Apple has about 3B less shares to pay dividends to shareholders than Microsoft. That’s a lot less drain on Apple’s cash going forward especially if they ever stop such huge buybacks.

      I also wondered by Apple’s share price or P/E doesn’t immediately increase after those buybacks, but I suppose only investor confidence in Apple’s growth will change those metrics. I have noticed that negative rumors have much more of an effect on Apple’s stock value than any number of buybacks. That’s kind of weird to me.

  2. Think about how many products could have been developed and brought to market with $24B.

    Instead, Apple’s management uses the money to increase the value of their stock options.

    Why backpacks once were and should again be illegal.

  3. Imagine if Apple had instead used that cash to buy Volkswagen and Disney.

    Would investors have valued that more highly than the marginal return we’ve seen from the buybacks? I’m not saying they were a bad idea (for a number of reasons they have been a good use of some of their cash). But Apple could have placed some bigger bets to realize one or two of their bigger visions (cars, content).

    1. It seems as though most of those investors have already left and gone to Microsoft which has a 75% institutional ownership compared to Apple’s 60% or so. Certainly, Microsoft has done a lot better than Apple over the past year in terms of market cap value whether that really means much, apart from bragging rights.

Add Your Feedback

This site uses Akismet to reduce spam. Learn how your comment data is processed.