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Apple's share price today closed above $600 for the first time, hitting new highs after hours as well. It's been a busy day for Apple shareholders, with the pre-trading announcement that the company will be initiating a strong quarterly dividend and has authorized $10 billion share buyback program.
After the final bell, Apple announced that the company moved more than 3 million new iPads in the first four days of eligibility, making the new iPad the fastest selling tablet in the world.
AAPL closed at $601.10, an all-time high, and nearly reached $605 in after hours trading. Apple should report earnings for the first calendar quarter in late-April, after reporting record earnings and sales for the holiday quarter.
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(View all)Look, after everything they did, Apple added about $38 billion in cash to its hoard last year.
Let's say that Apple's profits remains the same over the next three years (unlikely) and they use $15 billion each year for the dividend/share buyback program. They would still be adding $23 billion each year. Today's $98B hoard would end up being over $165B in March 2015, even after the $45B program ended.
Also, Apple is likely buying components with foreign cash, not U.S. domestic cash. Remember that despite all of Apple's strategic component pre-purchases, they are still growing cash.
You need to understand that repatriating cash back to the USA is particularly expensive tax-wise.
Remember that the share buyback program is there to prevent share dilution from RSUs. In the next few years, some senior Apple executives are going to see their option incentives become available to exercise. If Apple doesn't buy back shares, they would have to issue new ones, which would dilute the value of the existing shares. Apple grants options to many employees for excellent performance, etc. (they're called the "golden handcuffs" for good reason), but those shares have to come from somewhere. Many senior management team members were granted options as an incentive for them to stay with the company, especially after Steve died. Basically, Apple promised these execs a pile of money in the future without saying where it was going to come from. Now they said "we going to use some of our cash now and set it aside for when that day comes."
Note that the dividend payout is tiny and really doesn't stop AAPL from being a growth stock.
The $40B dividend and share buyback program (over three years) is less than the cash flow projections, so Apple would end with even more cash anyhow since they are spending cash slower than they are accumulating it.
Even by purchasing real estate, developing new facilities, making strategic component purchases, acquiring companies, Apple still isn't spending as much as it makes.
They probably looked at this several times and decided that a hundred billion dollars in the piggy bank was enough for them to operate their business effectively plus provide a safety net for bad times.
As an AAPL investor, I'm fine with a few dividends, but that's not what I was hoping for when I bought these shares. I never expected AAPL to be an income stock.
It's not like Apple is giving up capital growth by providing equity income. There's still plenty of growth potential in Apple.
Here's a quote from a poster in another forum. I agree with the point their making.
The poster you are quoting clearly does not understand where Apple's cash comes from and that it isn't static going forward. :rolleyes: