Slashdot Mirror
Apple To Launch Largest Stock Repurchasing Plan In History
An anonymous reader writes "In conjunction with its earnings report for the second quarter of 2013, Apple issued a press release announcing some major plans for its ever growing stockpile of cash. It is increasing its quarterly dividend payout to investors by 15%. What's more, the company will spend $60 billion in stock repurchases, making it in Apple's words, 'the largest single share repurchase authorization in history.'"
No, they're not.
Dividends encourage investors to hold their shares for long periods of time by giving some income along the way. A buy back is something which boosts the price of the shares, but does nothing to generate a revenue stream for the investor. And if it doesn't inspire new investors to buy in, it can result in little or no benefit to the investor.
What's more, you can issue a dividend regardless of what the price of the stock is with respect to it's actual worth, whereas you shouldn't be buying back stock unless the shares are worth less than the management thinks they're worth.
Dividends themselves are generally something that only make sense when the firm doesn't have somewhere to invest the money themselves. It basically says to the investor that you're going to make more money investing the money elsewhere than we're going to derive by investing it ourselves. And frequently that means that the business can't expand any further for regulatory reasons.
It really isn't so much that they are going to waste it (though that is always a concern). investors/shareholders make money from one of 2 ways (like it or not investors are their to make money), either the shares go up in value or they receive an income as dividend from those shares. Apple doesn't have to provide stellar growth, they can continue on with their excellent profit and earnings with no growth, however to do so they need to change the way they are returning value as without growth shareprice will stagnate which means you have just removed the traditional way that Apple investors were getting value from the shares. buybacks and dividend allow investor returns while also bolstering the shareprice through desirability as an investment. What they are doing makes sound business sense even if like me you despise them.