Half A Trillion Dollars Invested In 1 Stock
You’ve heard of the phrase “don’t put all your eggs in one basket,” but what about all your apples? For the past ten years, that’s exactly what tech giant Apple has been doing. With nearly 200 billion in cash on hand, the company has spent over half a trillion dollars in the last decade doling out dividends and buying back its own stock without fail. For Apple, it seems that putting all the apples in one basket has actually been an exceptionally good strategy.
But what does this strategy mean for Apple’s future? Will the company continue to issue dividends and buy back its own stock, or is there any cause for concern that this strategy might change? And what does Apple plan to do with its ballpark $200 billion cash hoard?
First, let’s take a look back at Apple’s history of dividends and buybacks and then take a look forward at what analysts have to say about the company’s future.
Apple Buyback + Dividends
When Apple first began paying a dividend at the end of its fourth quarter and fiscal year in September of 2012, few could have predicted the heights the stock would soar to over the next decade or so.
By buying back its own stock, Apple has cut down on its share count — slowly but surely dropping from just over 26 billion in September of 2012 to nearly 16 billion shares in September of 2021.
While these two might seem somewhat unrelated, they actually connect inextricably: The more shares Apple buys back, the fewer outstanding shares the company will have, which means the company’s dividend per share (DPS) will inherently rise with each buyback. Every time the price per share dips, Apple buys up even more, and the cycle repeats. This creates a natural demand and establishes built-in support for the company around the clock.
Looking forward to the future, Apple tends to raise its dividend every four quarters — this happens every April. For 2021, the company’s dividend was raised from $0.205 to $0.22 per share. For 2022, there’s little doubt the company’s DPS will increase again.
Apple’s Hoard Of Cash
To give you an idea of how much money Apple has on hand, the company has enough marketable securities to give every person in the United States over $600 each.
While many investors liked the sound of a company that had hundreds of billions at the ready during the uncertain early months of the COVID-19 pandemic, investors are now hoping that companies like Alphabet and Microsoft — who have around $160 and $130 billion in marketable securities, respectively — will turn that money into dividends and buybacks.
Thankfully for Apple and its investors, the company already offers an impressive and steadily increasing dividend and participates in large-scale buybacks every time Apple’s price per share dips. The problem is that a lot of this money is held in U.S. Treasuries, which offer a meager yield that pales in comparison to pre-pandemic yields.
What Apple decides to do with this excess of cash in the quarters and the years to come remains to be seen, but the hope — and the most logical solution — will be to increase dividends and buybacks even more than usual.
What Does This Mean For The Future Of Apple?
With its price per share still near all-time highs, the future of Apple stock looks brighter than ever. Indeed, bullish financial analysts see the company’s price per share heading up towards $210 over the next twelve months, while bearish analysts see Apple stock dropping to $128 per share a year from now. A discounted cash flow forecast reveals a fair market value of $190 per share.
Whether this price per share goes up or down depends entirely on what Apple does with its pile of cash going forward from here. Looking at the company’s history of dividends and buybacks over the past ten years, there’s little expectation that Apple will decide to pivot away from being one of the most shareholder-friendly companies in the technology world.
In other words, investors should expect to see Apple increasing dividends and buybacks in 2022 and beyond. The future of Apple should be just as good to shareholders as the past decade has been, even if the rate of increase diminishes due to the law of large numbers taking effect.
The Bottom Line: Half A Trillion Dollars Invested In 1 Stock
Even after investing over half a trillion dollars invested in dividends and stock buybacks over the past ten years, Apple continues to grow its massive cash hoard headed into the 2022 calendar year.
Given the company’s promising track record of rewarding its investors more handsomely than any other tech company big or small, it’s highly likely that Apple will follow its own lead and continue to put its money back into the hands of its investors whenever possible. Expect to see an increase in DPS come next quarter, and more buybacks on a massive scale whenever the price per share dips.
Because of these prospects, the smart money would suggest it’s best to invest in Apple on any share price dip. Just follow Warren Buffett’s lead, whose Berkshire Hathaway holds a mind-blowing 887 million shares in the company.
