Critics are wrong: Stock-buyback kingpins like Apple invest more, not less

“Corporate titans such as Apple and Walmart are under attack for buying back billions of dollars in stock while supposedly skimping on investment, but evidently the critics have it all wrong: The companies that buy back the most stock also invest the most in the future,” Jeffry Bartash writes for MarketWatch. “Apple announced plans last spring to buy back $100 billion in stock, but it also invested almost $17 billion in 2018 and it plans to invest $14 billion in 2019.”
“The biggest corporate tax cuts under President Trump in 31 years certainly helped, Cicione said, but he pointed out the surge in stock buybacks preceded them. Cicione said the largest and most successful American companies have managed to boost what is known as free cash flow, the difference between what a company receives and pays in cash, even faster over the past few years due to rising sales and sound management. That’s allowed them to give money back to shareholders and to increase investment.”
“Critics don’t see it that way… Earlier this month Democratic presidential contender Bernie Sanders and Senate Minority Leader Chuck Schumer said they would offer a proposal to sharply restrict stock buybacks unless companies invest more, especially in worker pay and benefits,” Bartash writes. “[Yet] hourly wages and total compensation for all American workers are growing more than 3% a year — the fastest rate in a decade.”
“If companies continue to generate huge amounts of extra cash, he said, they’ll simply shift from buying back stock to giving shareholders bigger annual dividends or special onetime dividends,” Bartash writes. “‘If companies generate so much cash, they will find other ways to return it to shareholders,’ he said.”
Read more in the full article here.
MacDailyNews Take: While we’d certainly like to see more in the way of dividends for AAPL shareholders, we’d rather see Apple to continue to efficiently reduce the number of outstanding AAPL shares which, over time, generally drives the share price higher. That said, we do expect Apple to raise the dividend for shareholders later this spring.
Interns: Roll out the barrel! Cheers, everyone!
SEE ALSO:
How Apple benefited from 2018’s U.S. Tax Cuts and Jobs Act – January 23, 2019
U.S. companies repatriated over half a trillion dollars in 2018 – December 31, 2018
Apple gives employees $2,500 bonuses after President Trump signed the GOP’s Tax Cuts and Jobs Act – January 17, 2018
Looks like Apple is bringing nearly all of its $250 billion foreign cash back home to America – January 17, 2018
Apple plans to add $350 billion to U.S. economy and create over 20,000 new jobs over next 5 years, pay $38 billion in repatriated taxes, the largest ever made – January 17, 2018
Apple expected to issue less debt in 2018 now that President Trump has signed the Tax Cuts and Jobs Act – January 16, 2018
U.S Treasury: 90% of U.S. workers likely to see more money in take-home pay next month – January 13, 2018
U.S. again assumes throne as world’s most competitive economy; first time since 2008 – October 17, 2018
U.S. worker pay rate hits highest level since 2008 – July 31, 2018
Apple expected to repatriate $214 billion to the U.S.; expect increased buybacks and dividends, not big acquisitions – December 22, 2017
Congressional Republicans deliver epic overhaul of U.S. tax laws to President Donald Trump – December 20, 2017