192 SHARES Share Tweet

As one of the most successful companies in the globe, investors may wonder whether Apple is capable of delivering fruitful returns. Despite its standing, Apple still relies on a diverse playbook which includes dividends and shares buybacks in order to generate returns for shareholders, rather than just profit growth and torrent earnings as it did initially.

In 2012, Apple initiated a capital return program and this has made them a share buyback and dividend powerhouse. Their share buyback history is $159 billion in investments and net cash. Over time, Apple developed an impressive record of returning cash to its shareholders through buybacks and dividends.

According to its most recent quarterly report, Apple pledged about $127 out of $175 billion of the company on stock buybacks. A remarkable amount was committed to buying back Apple’s shares (when you consider the fact that Apple’s entire market capitalization amounts to $573 billion). This demonstrates that Apple utilizes its financial resources to continue creating returns for investors no matter what.

Apple has allocated an uneven amount of the company’s capital return program toward stock buybacks rather than dividends and has pledged 68% of $250 billion in the program to fuel share buybacks. Their preference for stock buybacks suggests that it has certain advantages over dividends.

Why do companies buy back stock?

Breaking down the benefits and disadvantages of stock buybacks, when equated to cash dividends, can become a bit difficult. Investors should have a general framework for why different companies go for stock buybacks.

Buybacks are one out of two principle methods through which Apple can reward shareholders with their excess cash flow. The second method is dividends. Stock buybacks benefit investors because it helps increase the stock price of a company. It is ideal to say that Apple keeps repurchasing stock so as to increase its stock price.