For some investors, iPhone sales trends and rumored upcoming product launches may be the first things that come to mind when considering investing in Apple (AAPL 0.06%) stock. But there are two things that are arguably even more important to an investment thesis in the company: its war chest of cash and its incredible cash flow. These two items -- one from Apple's balance sheet and the other from its cash flow statement, give investors two good reasons to be bullish on the tech giant's shares.
Sure, Apple's products and services, its loyal customer base, and its powerful brand are critical to the investment thesis for the tech stock. But what sets this stock apart from many others is its exceptional financial health. Apple's pristine balance sheet and its meaty cash flow are downright mind-boggling.
Apple is a financial fortress
Just how much cash does Apple have? At the end of its fiscal first quarter, the iPhone maker had a whopping $165 billion of cash, cash equivalents, and marketable securities. Subtracting its long-term debt, the company had a net cash position of $54 billion. Believe it or not, many companies in the S&P 500 sport more debt than cash. Indeed, it's generally considered healthy for a company to run its business with a net debt-to-earnings ratio of three or less. That means that a company's debt can exceed cash and cash equivalents to the point that the net debt is up equal to three times a company's annual net income and still be considered to have a solid balance sheet. Yet Apple doesn't even have a net debt position. It has a net cash position.
Now this next cash metric is arguably even more impressive than Apple's balance sheet wealth: Its business threw off well over $100 billion of cash from operations in fiscal 2021, fiscal 2022, and the trailing-12-month period ended in the first quarter of fiscal 2023. Even after subtracting out the company's capital expenditures, or long-term investments into growth initiatives within its business, its leftover cash flow (otherwise known as its free cash flow) came in at $97 billion for the trailing-12-month period.
Apple is using its cash to build shareholder value
All of this cash is great. But some investors might wonder: what good is it if it's just sitting on Apple's balance sheet? Fortunately, it's not. The company is prudently putting this war chest of cash to work to enhance shareholder value. In the company's first quarter of fiscal 2023 alone, Apple returned over $25 billion to shareholders either directly or indirectly. Most of this was returned indirectly via share repurchases and the remaining amount was paid out to shareholders in dividends.
Investors can expect aggressive share repurchases and dividend payments to persist for the foreseeable future. Not only does Apple's $97 billion in annual free cash flow easily support its dividend and share repurchases, but management's goal is to become cash neutral. In other words, it is aiming for its debt to eventually equal its cash. With $54 billion of net cash and $97 billion in annual free cash flow, it's going to take a lot of dividends and repurchases to get to a cash-neutral financial position.
Investors will get an update on Apple's cash position and its latest share repurchases and dividends in a few weeks when the company reports its fiscal second-quarter results. The earnings report is currently scheduled for Thursday, May 4.
