Apple shareholders on Tuesday voted to approve compensation for Apple executives, including an equity package announced last year for Apple CEO Tim Cook who said that Apple planned to increase the company’s dividend.
The vote was non-binding and advisory. Apple shareholders also voted down a shareholder proposal opposed by Apple that would compel the company to reduce executive pay compared to median Apple employee pay.
Apple’s board strongly supported Cook’s pay package in a filing, citing a 867% return to shareholders, including dividends, from when he took over as Apple CEO in 2011 through September 2020.
Cook also said that Apple planned to increase the company’s dividend. Dividends totaled over $14 billion in the last four quarters, Cook said. The company paid a dividend of $0.205 per share in the last two quarters.
MacDailyNews Take: Apple’s dividend raises to date have been slight, as the company prefers to invest mainly in share repurchases, so expect something like a few cents per share increase ($0.22/share?) when Apple next reports earnings at the end of April. Last year, Apple’s board of directors declared a cash dividend of $0.82 per share of the company’s common stock (pre-split), an increase of 6 percent.
The dividend increase won’t be very much but it’s better than nothing. It’s unfortunate Apple is mostly interested in share repurchases, but I have no control over that. I can’t quite grasp how share repurchases help me whereas I can actually use or spend my dividends each quarter. Whatever has been decided, I honestly can’t complain as I’m doing quite well financially by owning Apple. Owning Apple for the last sixteen years has more than met my expectations. I think Apple is a terrific company and I hope it continues this way for many more years to come.
Share repurchases take those shares “out of circulation” making each remaining AAPL share represent a greater portion of Apple. Since there are fewer shares of AAPL available, they become more valuable over time. Dividends are immediate money for investors, which is good. Repurchasing shares represent long-term value, which is also good.
If only it was that simple. Don’t confuse the speculative value that some gamblers may pay for a share of stock versus that stock share’s actual current value.
As everyone should know, present value is the sum of all current liabilities and assets. Future liabilities include promised dividends, which can be changed up or down on the fly if economic conditions require it. Or a liability may be a loan payment, which is not as easy to renegotiate.
Now if Apple actually had a strong dividend and regular announcements for amazing new products on an annual basis, stock analysts might be more inclined to support higher speculative growth. But when a company DOES NOT have a strong pipeline, that’s when the financial games begin.
When Apple incurs debt to fund its stock buyback, it immediately incurs two risks: first, it has a debt payment that cannot be renegotiated without a financial penalty. Second, because all stock buybacks have to be disclosed and planned to a schedule, Apple isn’t picking up those shares at opportune moments. It bought back a lot of shares at overinflated prices.
Remember that when Apple sells a Mac computer, it earns over a 35% profit margin. You’d think that would be enough incentive for Apple to update its Mac designs every 3 years instead of every 5-7 years. When it buys its own stock, does it earn shareholders a 35% profit? Not even close. The new higher debt load erodes some long term profit earning capability the company could have earned if it concentrated its efforts on its most rewarding core competencies. Remember it took Apple over 6 years to retire the disastrous Mac Pro trashcan, so you can see how on the ball Apple executives are these days.
So why do so many companies buy back their own stock? There are a range of reasons, but the primary reason is because it juices stock prices in the short term. It tends to happen anytime corporate welfare from the Fed is pushed out following an economic shock. Whenever the Fed injects cheap cash to the banks, the first places those banks turn to lend it out to are the largest low-risk corporations (not to mom&pop shops on Main Street, it’s too much work for most banks to estimate the actual risk for issuing small business loans). So Apple thinks it got a great deal, taking out a relatively low interest loan it doesn’t need. Next, for a while Wall Street media hypes AAPL while Apple is borrowing. Timmy gets his mega executive bonus. MDN brags about stock price rather than whining about its perceived social/political disagreements for a short time. All that happy news convinces stock speculators to buy AAPL even if Timmy continues to hand out paltry dividends, even if the only software update is an emoji release, even if the only exciting new service is a Ping like zero profit margin news aggregator app.
Note it’s a similar strategy with stock split. It mathematically accomplishes nothing for anybody. But dumb investors see it as happy news, they always buy more, and Timmy again collects an unearned executive bonus.
So when that hefty dividend comes (dream on!), Won’t you please buy a 3 year old $5000+ Mac Pro with Intel processor and a needlessly complex snazzy alyoominyum case to make sure Timmy collects his bonus next year? He’s so close to having a billion in his offshore account. Come on and help the cause!
Didn’t have time to read all that, but note that I said “over time” and “long-term.” Speculative influence is mostly short-term, and it’s influence averages out over time. Conversely, having fewer and fewer shares outstanding has positive impact, especially if Apple continues its stock buy-back practices consistently. One stock buyback has little impact. But at king 10-20% of AAPL off the table over decades has significant impact, it’s just not blatantly obvious.
MS48,
I, too, wouldn’t mind a more robust dividend increase, but if share repurchases help AAPL to climb higher (or help curb more volatile price swings), then I’m OK with whatever the company’s finance gurus think is best overall for Apple.
Been long since late 2004 — my only regret is not having enough cash back then to have bought more (in 2002-2003, when I first started following AAPL).
Given the company’s cash stockpile and Apple’s stated goal of reducing that to zero, I don’t see they why they can’t do both share repurchases and a more robust dividend. Having a higher dividend yield would potentially reduce some of the stock’s volatility.
Stock repurchases only shows a company incapable of innovation in its core business.
Sorry but Apple has a lot of things to fix first. Apple needs to improve its hardware and software across the board, drop prices, diversify its supply chains, and gain a stable market share in a lot of global markets before it wastes another dime on share buybacks.
Whoever at Apple got the idea that zero cash was a healthy state should be fired immediately. Apple is not supposed to exist to empower Wall Street. It was founded to offer consumers personal computing tools that every one could use. Apple has strayed dramatically from that ideal. It needs to reinvest in what made it superior 15+ years ago. With subscriptions and apps, Apple completely lost its mission statement. That means reinvesting in new products before playing wall street games.
More money, excellent news.