Apple Inc.'s $250 Billion Love Note to Investors

Apple recently announced it was expanding its capital return program by $50 billion. The Motley Fool’s Dylan Lewis and Nathan Hamilton explain why that's a good thing for investors.

Motley Fool Staff
Motley Fool Staff
May 5, 2016 at 5:44AM
Technology and Telecom

Apple (NASDAQ:AAPL) plans to have returned $250 billion to shareholders by the end of March 2018, which should be good news not just for investors getting a piece but also for the company's stock price. The company announced along with earnings on April 26 that the board has authorized an increase of $50 to its capital return program, bringing it to $250 billion.

In this clip from the Industry Focus: Tech podcast, Dylan Lewis and Nathan Hamilton talk about Apple's capital return programs -- where they were a year ago and how they have expanded since then. They also examine why shareholders are generally pleased as punch about them, and one area where the company might stand to improve them.

A transcript follows the video.

This podcast was recorded on April 29, 2016. 

Dylan Lewis: One of the other big things he wanted to focus in on was the capital return program. At the time, it was a $130 billion program. It has now since ballooned to $250 billion, which is kind of crazy. Most recently, they announced, the board authorized an additional $35 billion in share repurchases, so that total is $175, the remainder, of course, going in the way of dividend payments. You are an Apple shareholder.

Nathan Hamilton: I am.

Lewis: I'm also an Apple shareholder. I love seeing these types of programs, what about you?

Hamilton: I do, it's pretty much expected at this point, because when you're generating as much cash as Apple is, even with gross margin pressures, even when the ASP is coming down, it's still a very good business to own. And, also, we'll address this as well: what the perceptions or thinking should be for Apple in the future as an investor. But it's definitely a positive. 

I would like a little more dividend, because right now, it's just above a 2% yield. But when you add in the fact that it's trading below 10 times earnings, for a company like Apple, at this very moment -- when I checked 10 minutes before this podcast -- it's definitely something to consider. But, altogether, they have to increase that capital return program over time. I believe it extends through 2018. I'm sure in 6, 9, 12 months from now, we'll see a further extension of it. But sometimes I prefer dividends over buybacks.

Lewis: Yeah. But either way, more good of the same for investors.

Hamilton: Absolutely.