$AAPL Probably Keeps One in the Chamber in Case You’re Pondering

by Dan March 10, 2015 12:16 pm • Commentary

If you haven’t had enough Apple in the last 24 hours we thought it would make sense to quickly touch on what is the next catalyst for the shares, an increase of their cash return. Today the company is holding their annual shareholder meeting.  We have gotten a few questions as to the timing of announcements this event tends to reveal as it relates to cash return, and recent history shows that the their first ever dividend and buyback was announced at their shareholder meeting on March 19th, 2012 (here):


But since then, the announcement for additions to the existing program has come more than a month or so after the shareholder meetings in conjunction with their fiscal Q2 earnings announcements.

April 23rd 2013 (here):


April 23rd 2014 (here):


Apple has yet to set their fiscal Q2 reporting date yet but I think it is a safe bet it is the week of April 20th.

Taking a quick look at Apple’s calculation of their cash return since the initiation of their plan, it is clear that almost half of their shares bought back were done in an accelerated fashion.

Apple Return of Capital per Apple
Apple Return of Capital 

In 1Q13 the company bought $2 billion accelerated, 3Q13 bought back $12 billion accelerated or 3x that in the open market. In 2Q14 they bought back $12 billion accelerated or 2x that in the open market and then in 4Q14 bought back $9 billion accelerated or slightly more than what they bought in the open market.  What’s clear to me is that when the stock was down in 2013, and earnings were declining 10% Apple was still actively managing earnings, even on a quarter by quarter basis.

Given the strength of the iPhone upgrade cycle, the uptake in Pay, the impending launch of the Watch, and the stock just a few % from all time highs, I suspect that the company will likely save some ammo for the back half of the year to partake in accelerated share buybacks when earnings growth could dip in front of the S launch of the iPhone 6 expected in September.  All of this despite calls for further massive share returns.

I suspect investors hoping for a dramatic increase to the existing plan, greater than 30% may be disappointed as more and more of their $178 billion in cash is sitting overseas (about 85%). An amount that is less than the debt they have onshore.  AAPL will increasingly need to raise debt to fund domestic buybacks (which they just did both here and in Switzerland).

So while investors continue to point to catalysts for stock as upside from Watch and Pay, increased upgrade strength from iPhone and increased buybacks and dividend (currently yields 1.5%), I think it is safe to say all of this may be in the stock at current levels, except maybe a huge beat on iPhone units.