In addition to buying back shares, Apple said it would increase dividends for its investors by 16% to a whopping 73 cents per share.
In an effort to return capital to its investors, Apple announced Tuesday its decision to buy back $100 billion in stock, though the company didn’t disclose the timeline for the repurchases.
It was in January that Apple surprised its investors with the announcement that it would be bringing back most of the $252 billion which it held overseas. Back then, Apple’s announcement had come in the wake of new tax law which granted organizations tax exemptions from bringing overseas money home.
While the investors knew in advance that Apple would be buying back shares, what they didn’t know was what Apple would do with the cash pile. On Tuesday, therefore, the investors came to know that they should expect to a huge windfall.
If that wasn’t enough to appease its investors, Apple undertook another bold move on Tuesday. It announced that it would be increasing dividends for its investors by 16% to 73 cents per share. This dividend increase has made Apple the largest dividend payer, leaving the previous market leader Exxon Mobil behind.
Due to high sales in the overseas markets, Apple’s cash pile had become gargantuan over the years. So much so that in the buildup to this report, it was reported that Apple had $267 billion in cash reserves abroad.
However, since under the previous American tax law any money brought back from overseas was subject to high tax rates, Apple remained adamant not to bring it back home.
The situation changed only a new tax cut which gives organizations huge tax exemptions on the money they would bring back to America from overseas.
Investors Set to Earn Windfall
If there’s one person who the investors should thank for receiving a windfall, it is President Trump. For it is only due to his tax cut that Apple decided to buy back its stock and benefit from lower tax rates.
Share buyback, as the term is known in financial circles, is great not only for Apple’s investors but also for its executives and employees. That is, because, it produces a limit on the supply of shares per sale, hence lifting the stock prices by decreasing the supply.
Not everybody, though, is praising President Trump after Apple’s move. Some people are worried that the proposed buyback could dissuade Apple from investing in research and development, or hiring. Others contend that it would increase economic inequality as only the wealthiest people would stand to benefit from it.