Apple Inc. (AAPL)’s Share Buyback Frenzy Means Dividend Hike

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Apple Inc. (AAPL)’s Share Buyback Frenzy Means Dividend Hike
ElisaRiva / Pixabay

Apple Inc. (NASDAQ:AAPL)’s share buyback program has increasingly become more lucrative for investors. That’s despite Carl Icahn dropping his proposal to push the company to spend another $50 billion on stock repurchases. Over the past 12 months, the tech giant has retired shares worth more than $40 billion, including the latest $14 billion buyback when the stock took a nosedive after the company missed iPhone sales estimates.

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Apple CEO should stop timing the market

But Robert Weinstein of The Street says that Tim Cook shouldn’t be so focused on the daily stock movement. He needs to worry about creating the next big iHit product that people will stand in line for days in advance to get their hands on. Recently, the Apple Inc. (NASDAQ:AAPL) CEO told The Wall Street Journal that he was surprised to see the market’s reaction to lower-than-the-consensus iPhone sales and revenue guidance. Cook may be opportunistic in buy the stock when cheap. But how does he know the stock wouldn’t get cheaper? That’s why Weinstein says Tim Cook should stop timing the market.

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Apple Inc. (NASDAQ:AAPL) doesn’t have to follow the orders of Carl Icahn either. For about half the money the iPhone maker spent on buybacks, it could have purchased Yahoo! Inc. (NASDAQ:YHOO). Buying the digital media company looks more attractive than buying its own shares. Yahoo controls about 24% of Alibaba, which is currently valued at more than $100 billion. It means more than 60% of the Sunnyvale, California-based company’s current market value is in cash and investments.

Buyback makes it easy for Apple to raise dividend

However, there are silver linings. A reduction in the supply of anything makes it more valuable, and Apple Inc. (NASDAQ:AAPL) is no exception. There will be fewer shares to pay a dividend on, bringing down the total cost of declaring dividends. As a result, Apple can easily increase its dividend. For the same reason, many investors have fallen in love with the stock.

Apple Inc. (NASDAQ:AAPL) shares skidded 0.46% to $522.81 at 12:50 PM EST on Monday.

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12 COMMENTS

  1. “…it went on to become the largest most successful company in the world. In the end, that’s all that counts.”

    Maybe for you but not people that expect good (high) returns on their investment.

  2. “You said “year” but now you’re talking 2 years.”

    I said “…flounder for more than a “year…”
    September 19 2012 is 1 year, 5 months.

    “Apple is up 17% over the last 12 months, beating the DOW.”

    Feb 25 2013 AAPL was $442. Today $527. Up 19%.
    AMZN $259, today $351. Up 35%
    GOOG $790, today $1212. Up 53%

    For YOUR original 12 month time frame, even counting dividends, AMZN and GOOG made more money for their investors than AAPL.

  3. You’ve gone to a lot of trouble to show that Apple, like all human endeavors, makes mistakes.
    That’s par for the course in this world.
    Its not whether you make mistakes but how you recover from them that matters.
    In Apple’s case, it went on to become the largest most successful company in the world.
    In the end, that’s all that counts.

  4. Here’s their track record…

    1980 The Apple III: The Apple III was the first Apple computer not designed by Steve Wozniak.
    The result? A super buggy machine, a motherboard that got too hot too fast, and frequent crashes. Chips would pop out of their sockets, resulting in severe problems with the entire system.

    1983 Lisa: Legend has it that Apple buried the evidence, er, excess inventory, of one of their biggest failures in a landfill in Logan, Utah. While the GUI-based system was considered a technical achievement, it was a sales failure. At an asking price of $10,000 in 1983, it cost the equivalent of over $22,000 today. Small change compared with what it cost Apple: $50 million in hardware and $100 million in development, selling just 10,000 units.

    1989 The Apple Macintosh Portable: Here’s a not so fun problem to have: The Mac Portable sometimes failed to turn on even when plugged in due to its battery design.
    Plus, it was 16 lbs. What’s so portable about that?

    1993 Apple Newton: This tablet failed because of its shoddy battery life and hard-to-read screen.
    It was also so infamous for its terrible handwriting recognition that it inspired a mocking from The Simpsons.

    1995 Apple Pippin: PlayStation, Nintendo, and Sega consoles were already out and more popular, so game developers and users ignored the Pippin when it hit the market.
    Priced at $600, the console was predicted to sell 300,000 units in its first year. Estimates put actual sales at somewhere between 12,000 and 42,000.

    1996 20th Anniversary Mac: Apple’s Twentieth Anniversary Macintosh is a limited-edition personal computer that was released in celebration of the company’s 20th birthday. It cost almost $8,000.
    Despite its poor sales, the TAM remains a popular item amongst dedicated Macintosh collectors. As of 2010, complete working machines with boxes were selling for $1,000.

    1997 Apple eMate: The eMate was actually a good machine and went on to inspire the PowerBook series.
    But Apple never made the Emate available for anyone outside educational purposes, which limited the machine from spreading across the entire spread of Apple users.
    Interesting fact: To this day, Apple has never released the sales figures from the Emate.

    2000 Power Mac G4 Cube: A piece of antique porcelain retains value when it shows signs of crazing. Those fine, veiny cracks can even serve to authenticate it. But on a brand-new stunner like the 2000 Power Mac G4 Cube, the effect was off-putting. Miniscule cracks in its surface notwithstanding, its $1,600 price tag turned the arriviste into a has-been within a year.

    2004 The U2 iPod: As part of the partnership between the company and band, Apple created a U2-branded iPod, offered U2’s single “Vertigo” exclusively through the iTunes store, produced an iPod commercial featuring U2 and created the first-ever digital box set featuring all of U2’s albums.
    The iPod wasn’t a hit. Its launch price was $50 higher than its identical white and chrome model, and offered little (if any reason) to purchase it.

  5. Apple has a consistent history of producing excellent products and there is no cause to believe that they will suddenly change their course.
    Appple’s track record speaks for itself.
    Its the critics who have the burden of proof.

  6. @RussellL:disqus
    You said “year” but now you’re talking 2 years.
    Why not make it four?
    Since 2/23/2010 Apple has risen over 150%, nicely beating Google.
    Apple is an investment for the long term at a reasonable P/E with actual DIVIDENDS being paid unlike Google on both counts.

  7. “Since none of you know what happen specifically has developed and when they will be released, you can’t assume they are not developing or planning to release anything. So that criticism is a non-issue.”

    Since you don’t know what they are planning, the same can be said about “… Tim Cook is timing the market is a sign he’s focused on all areas of the business.”

  8. On September 19, 2012, AAPL was how much? $702. Today it closed at $527. That’s down 24%.

    During the same time, AMZN was $261 and today it’s $351. Up 34%.
    GOOG $727, today $1212. Up 66%.
    Easily beating the DOW and AAPL.

    As I have said before, AAPL is a dog and there are plenty of other stocks out there that can give you much better returns. Lookup CSIQ, SCTY, SPWR and TSLA.

  9. What ridiculous reasoning. Apple knows itself better than pundits and the fact that Tim Cook is timing the market is a sign he’s focused on all areas of the business. Since none of you know what they have specifically developed and when they will be released, you can’t assume they are not developing or planning to release anything. So that criticism is a non-issue.
    Second, are Yahoo and Alibiba better companies than Apple? Do they have the same margins, pull in the same revenue, operate with the same efficiency? Because if they don’t it certainly makes far more sense in Apple to to buy back shares than diversify in markets they don’t care about, buying companies that aren’t that great in the first place.

  10. @RussellL

    Apple is up 17% over the last 12 months, beating the DOW.

    “You are entitled to your own opinion but not your own facts.” – Daniel Patrick Moynihan

  11. “A reduction in the supply of anything makes it more valuable…”

    It’s only more valuable if the supply can not satisfy demand.
    The price of AAPL has continued to flounder for more than a year which means there is very little demand.

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