Apple's $62.9 billion stock buyback program called a bad investment in new report

A new report is calling Apple's stock buyback program, which amounted to $62.9 billion in the first half of 2018, a bad investment, while ignoring the actual impact of what happens when a company retires shares.

A new report by the Wall Street Journal highlights the money that companies have spent on stock buyback programs after a tax break by the federal government, and uses Apple as an example. Noting that the $62.9 billion that Apple spent repurchasing its own shares is now "worth" just $54 billion had the stock been retained, the publication claims that the figure represents a loss of $9 billion had they purchased the shares at today's market price of $151.

The report spends very little time noting that those repurchased shares were retired, however, and no longer have any direct monetary value. The retirement boosts the earnings per share metric that the company must report every quarter.

Apple has repurchased shares across all of 2018, paying as high as $222 a share. Any company that spends that amount of funds on rebuying their own stock will occasionally have time in the red. Repurchasing has other benefits to the company, such as reducing the number outstanding shares and buoying the dividend value per share paid to investors.

Many U.S. companies including Apple have been buying back stocks at a fever pace this year after the passage of the Tax Cuts and Jobs Act in December 2017 which dropped the corporate tax rate from 35 percent to 21 percent, also allowing Apple and most of the rest of the Fortune 500 companies in the U.S. to repatriate large sums of offshore cash.

152 Comments

yojimbo007 1165 comments · 12 Years

About 5 years ago

Too many idiots feeling free to make stupid comments ... thats the journalism of today. Buyback are not an investment in value gain.. They are intended to reduce share count and boost eps.. Share values are directly effected by eps. In the long run.. actually this massive drop in share prices is a great thing for the buyback program. Many more shares can be bought back and retired.

MacThaLife 14 comments · 6 Years

So... Apple’s upper level management & board don’t know wtf they’re doing... according to the ‘brilliant minds’ at the WSJ and other financial news outlets. If only Apple had the guidance of all of the supply chain gurus, imagine where the company/stock could be now....
/s

davgreg 1046 comments · 9 Years

Buybacks only make sense if you are getting fees from the transaction.

If you do the math and figure in all the impacts, paying a special dividend would be a better use if the intent was to return money to shareholders.

tomahawk 171 comments · 23 Years

davgreg said:

Buybacks only make sense if you are getting fees from the transaction.

If you do the math and figure in all the impacts, paying a special dividend would be a better use if the intent was to return money to shareholders.

Depends who you ask. I believe Buffett has said he doesn’t like special dividends because it doesn’t allow the investors to control their taxable income. A buyback increases shareholder value without actually distributing the money unless the investor chooses to sell.