Hacker News Reader

Comment by nodesocket | Hacker News Reader

The Board approved a 10.5% increase to the Apple's quarterly dividend, and has declared a dividend of $0.63 per share of common stock, payable on May 18, 2017 to shareholders of record as of the close of business on May 15, 2017.

Increasing stock buyback by 75 billion as well, showing that Apple believes their stock still has room to grow.

View on HN

> Increasing stock buyback by 75 billion as well, showing that Apple believes their stock still has room to grow.

Or means that they have nothing else productive to do with their cash.

They just have massive cash reserves. They could spend $50bn on R&D for new products, and still have plenty left.

Typically this is not true. When public companies buy their own stock, this is considered a very positive signal. Apple could do most anything they want (including buying most any company) with their cash hoard.

Not necessarily. IBM has had 20 consecutive quarters of declining revenue [1]. They continue to buy back stock, adding $3B to their repurchase program last year. They've bought back stock furiously since 1999 [2]. It's a defensive measure to reduce the share float, and thereby juice EPS.

[1] https://www.bloomberg.com/news/articles/2017-04-18/ibm-misse... [2] https://seekingalpha.com/article/3977909-ibm-bought-155-bill...

True... But I'd say IBM is the exception to the rule.

It's a good policy to buy back stock whenever you have excess cash flow and the stock is undervalued compared to your other investment options. An example might be your stock has a PE ratio of 8, so it's yielding 12.5% and your other options look to yield 10% or less.

Of course I'm not saying IBM is right, or undervalued. If profits are falling a 12% yield might be a 6% yield before you know it, that's why valuations are more complex than my simplistic example. And many companies do buybacks to juice stock prices for the execs options, regardless of value, so it's not a grant signal.

And they chose to buyback stock and pay dividends, which means they think those other uses for their cash are unproductive relative to buying back the stock.

From the point of view of shareholders, stock buyback is superior to paying dividends taxwise. If shareholders just hold the stock, the price rises, and they don't have to pay any taxes.

Rather, they taxes on it when they sell. Of course, the cost is that you don't have anything in your pocket today. And gains written on paper are just as easy to erase.

AAPL also has a dividend. From the point of view of shareholders, growth is better than dividends or buybacks.

If hold a stock, you pay 0 tax on share buyback gains. Not so for dividends.

Capital gains taxes are typically paid when shares are sold and gains are realized.

It's the exact same rate once you sell.

Sure, but you dictate when you sell and must take the dividend whenever it is offered. It is always easier to plan for something you trigger manually rather than something forced upon you.

At the cost of having none of that money in your pocket until you sell.

…which you could just do immediately if it's that big a deal.

This is not a choice made for retail investors who hold a handful of shares — it won't make a noticeable difference for that class of investor either way. It does, however, make a huge difference for institutional investors and for large shareholders.

Only if you believe that the capital gains rate will not be different when you sell.

Personally, I prefer dividends rather than buybacks from Apple.

Then sell shares in an proportionate amount to the share price increase due to buyback. It's the same either way, you just have the choice of whether to realize those gains now or later.

> Increasing stock buyback by 75 billion as well,

That's a substantial buyback, almost 10% of the company.

Reply on news.ycombinator.com