What will Apple do with dividends and buybacks?

One question many Apple investors have is “What will Apple do with dividends and buybacks?” in the face of the COVID-19 pandemic. As companies look to conserve cash during the coronavirus crisis, many U.S. investors will likely see sharp declines in capital returns this year, according to S&P Dow Jones Indices which is predicting a significant first-quarter decline in buybacks and a dismal second quarter.

Apple ended the quarter with $207 billion in cash plus marketable securities. The company issued a EUR2 billion denominated green bond, retired $1 billion of maturing debt and reduced commercial paper by $1 billion during the quarter, leaving Apple with total debt of $108 billion. As a result, net cash was $99 billion at the end of the quarter, and the company maintained their target of reaching a net cash neutral position over time. Apple returned nearly $25 billion to shareholders during the December quarter and began a $10 billion accelerated share repurchase program in November, resulting in the initial delivery and retirement of 30.4 million shares. The company also repurchased 40 million Apple shares for $10 billion through open market transactions and paid $3.5 billion in dividends and equivalents. As Apple has done for the last several years, the company stated they would share their plans for the next phase of their capital return program when reporting results for the March quarter.

Reuters:

while companies are more hesitant to cut or suspend dividends, some have already done so, potentially leading to S&P 500’s first annual drop in dividends since 2009, according to senior analyst Howard Silverblatt.

Along with the direct support when buybacks are made, they also swell earnings per share as they result in lower share counts. But since they are easier to suspend than dividends, buybacks are the first place companies reduce capital returns.

Silverblatt, at S&P Dow Jones Indices, says buybacks may be depressed for the full year as “companies are going to be concerned about their liquidity” for a while even when things start looking up.

“When we believe the virus has hit the bottom then you start the long way up for the economy which is going to be relatively slow to recover. It’s going to take a quarter or more for companies to put their toes back in the water,” Silverblatt said.

Companies that have already announced a pause in buybacks include eight of the biggest U.S. banks. On Tuesday, companies including Intel Corp (INTC.O) and Chevron Corp (CVX.N) made suspension announcements…

Apple Inc led spending in the [calendar fourth (holiday)] quarter with $22.1 billion in buybacks.

MacDailyNews Note: No date has been announced yet for Apple’s Q220 report, but last year it occurred on April 30th, so we’re about a month away from finding out how Apple will handle their capital return program.