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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.'"
In my opinion, they just will burn their cash. It is inevitable: they must lower device prices, so their shares will fall. No way out.
But I'm glad I invested in Bitcoin.
Do the executives get paid in or own any stock?
Repurchasing stock is meant to increase shareholder value, raising the dividend is meant to do the same. Apple investors have been asking when they will get to see some of the money Apple's been making. This is all meant to keep their investors happy.
If the company repurchases its stock, the shares go away, thereby increasing the value of the remaining shares.
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.
$60 Billion is only a small fraction of the company's overall value
The current market cap is $381B. $60B is an enormous buyback.
It is a myth that dividends drive up the price of stock. The simple relation is this: after the dividend is paid, the company no longer has the money so the stock is worth less. You can easily verify this, just look at the price of any stable company on the ex div date. It will be lower by roughly the dividend.
When all you have is a hammer, every problem starts to look like a thumb.
Repurchasing stock is meant to increase shareholder value, raising the dividend is meant to do the same.
The latter is completely wrong (other than tax treatment, dividends have a neutral effect on shardholder value). The former is correct only because a company acting rationally will only purchase its own stock if it is confident that the stock is undervalued. It is far from clear to me that Apple's stock is undervalued.
When all you have is a hammer, every problem starts to look like a thumb.
No. No they do not.
This is the biggest lie ever told to the American public, and anyone telling you this should never be trusted. (Yes. This is a large list.)
Companies exist to promote commerce, create useful goods, and provide a livelihood for their employees. Owners and stock holders are allowed (This is a revokable privilege, not a right) to make money to provide incentive to facilitate the above functions. Anything less is a criminal enterprise.
When we deviated so far in to the "making money" and "shareholder value" ideas is the day this country started to fall apart.
This is not an argument. This is advice. Ignore it at your own peril, America.
You are wrong. Stocks that pay dividends show this wave pattern where the price rises just before the dividend as it approaches. However this crest pattern does not preclude nor negate a long term gain in the stock price.
If a stock rises as the dividend date gets closer, purely because of the dividend then those new buyers are just gullible, and the everybody who failed to value the company accurately is just stupid. Proof: if we could rely on a stock price increasing just before the dividend then we would bid up the price right now, well before the dividend. And so the stock would not rise in advance of the dividend because it was already fully valued. See?
If you don't see, then I have a perpetual motion machine to sell you.
When all you have is a hammer, every problem starts to look like a thumb.
That, OR they might want to start coming up with some new ideas.
Well Apple takes on average about two-three years to deliver products that create entire markets.
So they are about due, and Cook said there were some surprises coming in the fall.
But it's absurd for you to mention Jobs in this context, products take many years to complete. It will be at least two more years before we see products that never had input from Jobs, including this one.
It's also kind of funny how Apple "needs" to come up with new ideas, when no other company seems to have the same need... or at least no-one ever says they do.
"There is more worth loving than we have strength to love." - Brian Jay Stanley
Stick to your roots guys, this isn't a stock forum and 99% of the people here clearly don't know one blessed thing about investing, how companies work, or even what these big numbers actually mean.
Actually its worse then that, but I'm being politic.
-Matt
, purely because of the dividend then those new buyers are just gullible,
Nope. The dividend is the reward for holding the stock for a full quarter. Thus the stock price at the beginning of the quarter would be the amount that makes the dividend comparable to the interest rate the stock price would earn if it owned corporate debt.
However as the date of the dividend approaches the former owner wants a larger part of this reward because it held the stock for most of the quarter, while the new holder naturally expects less of it.
In the extreme, if I buy the stock a second before the dividend is issued I would get a hefty return for having done nothing unless the price rose.
Your proof is all wrong because it fails to consider the cost of holding the stock instead of say corporate debt.
What I described has a simple, two word name: efficient market. Say, did you ever read a finance textbook? Or try wikipedia/a.
When all you have is a hammer, every problem starts to look like a thumb.
It depends upon what you mean with the word "created." They certainly changed the face of computing, mobile music players, smart phones, and tablets. All of these categories existed before Apple got into the market, but once Apple decides on an approach, other companies seem to try and do things in a similar way.
Apple: New Product Development for Microsoft since 1985!
Any insufficiently advanced magic is indistinguishable from technology.
No, the net effect is not zero. Think of it this way, if there were a company that made $0, but had $150B in the bank, what would that company be worth to investors? It would not be worth $150B. Think of it another way, what kind of return do investors expect for their money? If you believe that apple's cash is added directly on top of their value, that means their value minus cash is $230B. On a profit of $45B, that's a P/E ratio of just 5! That would be an incredibly good investment, but it's not because money in apple's bank account isn't worth as much to an investor as money in his own bank account. So if apple can reduce the number of shares, while also reducing their cash, that's a net benefit to their (remaining) investors.
I feel stupid having to add a disclaimer, but even someone that isn't a huge Apple fan (namely me) can admit that, between ipods, iphones, and ipads... they really did break their respective markets wide open.
Mp3 players existed before the ipod, but they were borderline niche devices. Business types had Blackberrys and some people had shitty winmo smartphones, but it was nothing like what happened when the iphones came around. Windows tablets existed before the ipad, but it was never anything like what happened with the first ipads hit the market.
And all of those markets did well as a result, and let's not lie to ourselves because they're not slashdot's favorite company.
Incorrect! Who do you think sold them BASIC for the Apple II?
...I'm kidding; they had their own.
Until 1979.
When Microsoft sold them a better one.
Bio questions? Ask me to start a Q&A journal. Computer analogies available for most topics!
they really did break their respective markets wide open.
Kudos for coming up with a much more accurate way of phrasing this than I did - "Created" really was a wrong term compared with "elevated" or "break wide open" as you said.
Basically they expanded the market greatly for a number of different product categories, and not just hardware - iTunes and online music counts as well, it was really Apple that made that a consumer market (against the will of the music industry).
"There is more worth loving than we have strength to love." - Brian Jay Stanley
Both the cash dividends and share repurchase of same value have equivalent effect on the wealth of the shareholders. This assumes that all other factors such as the taxation are the same.
also here (pdf)
While buybacks and dividends are mathematical equivalents, executives and investors conceptualize them very differently.
If the company repurchases its stock, the shares go away, thereby increasing the value of the remaining shares.
More significantly, it increases the value of stock options. Dividends don't do anything for option holders. (They're also taxed at a higher rate than the capital gain after a stock buyback. Buybacks and taking on debt are actions successful companies take primarily for tax reasons.)