Many investors don't fully appreciate just how powerful Apple's (NASDAQ:AAPL) share repurchase program is, or how tangible its benefits are. This is one of (if not the) most accretive capital return programs out there, simply by virtue of its size.

Most of the time, companies opt to merely offset the dilution associated with stock-based compensation to employees. But Apple buys back its stock hand over fist, and the result is a significant reduction in shares outstanding. Look no further than Apple's share count since its capital return program started back in late 2012.

AAPL Shares Outstanding Chart

AAPL Shares Outstanding data by YCharts.

To date, Apple has now cumulatively repurchased an incredible $143.7 billion in less than five years. That's larger than the market caps of many mature megacap companies (those worth over $100 billion). As of right now, Apple's board has authorized $175 billion in share repurchases, and the company provides annual updates to its capital return program every April.

Chart showing cumulative share repurchases over time

Data source: SEC filings. Chart by author. Calendar quarters shown.

The company has tended to allocate more of its capital return program toward repurchases, confident that shares are undervalued. I'd expect the board to do likewise for 2017.

Person using a Mac and iPhone

Image source: Apple.

Record EPS, brought to you by share buybacks

Apple noted that it set several records last quarter, including revenue records for many of its most important businesses. Earnings per share also hit a new all-time quarterly record of $3.36, despite the fact that net income was down modestly in dollar terms at $17.9 billion.

Metric

Q4 2015

Q4 2016

Net income

$18.4 billion

$17.9 billion

Diluted EPS

$3.28

$3.36

Shares used in diluted EPS

5.59 billion

5.33 billion

Data source: SEC filings. Calendar quarters shown.

In no uncertain terms, the aggressive share repurchase activity led to a meaningful reduction in shares outstanding, which is what allowed Apple to post its highest quarterly EPS ever. That's what I call earnings accretion. For shareholders, a record bottom line is as tangible as it gets.

Ideally, Apple continues its capital return program with the same emphasis on share repurchases. But in order to continue at the same rate, Apple may need to repatriate some cash since it is now approaching $100 billion in total debt, including commercial paper and its recent $10 billion bond offering. Since the capital returns have largely been funded with debt, and there is a limit to how much debt Apple can take on, Apple's domestic cash could be the most significant limiting factor to continued repurchases.

Evan Niu, CFA owns shares of Apple. The Motley Fool owns shares of and recommends Apple. The Motley Fool has the following options: long January 2018 $90 calls on Apple and short January 2018 $95 calls on Apple. The Motley Fool has a disclosure policy.