当下行情充满不确定性，苹果回购股票意义何在？
过去五年，苹果公司通过精明的回购措施，为股东带来了巨大的回报。在股价较低的时候，回购是一种极好的策略，但现在股价并不便宜，所以回购股票策略显得不够灵活，让人不禁产生怀疑。
在5月2日召开的伯克希尔哈撒韦公司虚拟股东会议上，沃伦·巴菲特坚决维护股票回购这种做法。他宣称：“现在反对回购在政治上是非常正确的。”巴菲特指出，美国联邦政府的COVID-19救济计划禁止贷款和补助金的接受人回购股票，这显示出现在流行跟风“呼喊公司回购股票是多么糟糕”。但是，巴菲特又重申了他常说的一种观点，即通过回购向投资者返现成为时下最流行的一种方式，这种方式是有价值且和负责任的，因为投资者“无论是否愿意”，都可以积累所有权股本，且无需被迫动用其应税股息年度利润分成。
巴菲特补充了一句很重要的话：股票回购应该适时进行，不应该变成惯例。他说：“公司应该在股价低于实际价值的时候回购股票。如果股票价值低于其实际价值，这时候不回购股票是巨大的错误。”巴菲特警告称，如果就某一个特定年份公布数十亿美元的股票回购计划，即使股票定价过高，也会导致管理层囤积大量股票。巴菲特表示：“你听过有些公司说我们要花50亿美元或100亿美元回购股票，就好像你说我今年要花50亿美元或者100亿美元收购某家公司一样，你根本不知道你用这笔钱能得到什么。”
巴菲特的公司伯克希尔哈撒韦持有价值700亿美元的苹果公司股票，占其总投资组合的四分之一左右。作为iPhone制造商的苹果每年都会大手笔回购股票，这在美国公司中堪称另类，但伯克希尔却因此赚得盆满钵满，而且巴菲特是苹果CEO蒂姆·库克及其管理高层的超级拥趸。但苹果在股价高企之际承诺继续回购，这时候按照巴菲特的标准提出的问题似乎合乎逻辑：“股票回购之王”对自己的股票如此迷恋，以至于愿意以任何价格回购吗？
苹果公司以前的回购策略带来了丰厚回报
在4月30日发布的第二季度财报中，苹果宣布将增加500亿美元股票回购计划，总回购规模达到905亿美元。苹果公司慷慨进行股票回购并不令人意外：过去五年，回购一直是其回报股东最强有力的工具。
自2014年10月1日至2020年3月（苹果的财报年度截止于9月30日），苹果公司的自由现金流达到3,210亿美元，其中共有2,780亿美元即86%被用于股票回购。事实证明，该政策取得了巨大的成功。苹果回购股票支付的平均价格为每股160美元，比其五月初的291美元低45%。过去五年半，苹果公司的流通股减少了26%，从58.65亿股减少到43.34亿股。自2014年以来持有苹果公司股票的股东们发现，公司的定期回购计划使他们的利润分成增加了超过四分之一。巴菲特把苹果公司作为研究案例，证明股票回购的优点。
股票回购对于苹果公司尤其重要，因为虽然公司利润庞大，但却很少能实现增长。2015年至2019年，苹果的营收增长幅度不足4%，只是从534亿美元增长到了553亿美元。但其每股收益却上涨了近29%。苹果通过大规模回购，使流通股减少了25%，所以每股收益上涨了约90%。2020财年，回购应该依旧是每股收益上涨的主要动力，因为公司营收最多可能与上一财年持平。苹果披露称，中国的供应链问题将延误其5G手机iPhone 12的发布，而COVID-19疫情对消费者支出的影响也导致其高价旗舰iPhone手机的销量增长缓慢。
去年市场突然开始改变对苹果股票的定价
一直到最近，苹果通过低价回购股票获得了巨大的好处。从2014年10月至2019年年中，苹果公司的平均市盈率倍数约为16倍。事实上，投资者对苹果的价值评估，与其数据所体现的价值是一致的，苹果公司是一个令人惊叹的赚钱机器，赚取了海量现金却几乎没有增长。但去年7月，苹果公司作为FAANG俱乐部（还包括Facebook、亚马逊（Amazon）、奈飞（Netflix）和谷歌（Google）等高增长股票）的一员，似乎绽放出新的魅力。突然之间，投资者对苹果股票的定价不再是把它视为一支可靠的传统股票，而是“高大上”的FAANG股票。从2019年夏到今年2月份的市场最高点，苹果股价从不到200美元上涨到325美元，涨幅高达65%，轻松超过了标普500指数。
令人惊奇的是，这种神奇的走势几乎没有因为新冠疫情危机受到影响。5月4日，苹果股价为292美元，自危机爆发以来仅下跌了10%。在股价大幅上涨期间，苹果公司的净收益并没有增长，依旧与往常一样平淡。公司的股价突然开始与基本利润脱钩，并从此一飞冲天。即使到现在，苹果的市盈率倍数依旧为23倍，比股价暴涨之前的五年平均水平高出44%。
简而言之，投资者在几个月内把苹果变成了一支增长股，而在疫情爆发之后，投资者又把它视为这个风雨飘摇的时代最安全的避风港。当苹果股价较低的时候，人们似乎不需要花心思思考回购股票是否合理，但在股票价格大幅上涨的今天，这个策略却显得更加可疑。
股价上涨并没有减慢苹果的脚步。从去年10月到今年3月，苹果在六个月内斥资385亿美元回购股票，回购价格为285美元，是前五年147美元平均价格的两倍。
股价大幅上涨降低了回购的价值
2018年，苹果回购了价值730亿美元的股票，令人震惊，当时其市盈率约为16倍。这相当于苹果每花掉1美元回购股票，其每股收益增加6.25美分或6.25%。2015年和2016年的市盈率倍数分别为14倍（每股收益增长7.1%）和12倍（每股收益增长8.3%），回购股票带来的回报更高。
但目前苹果的市盈率为23倍，其每花掉1美元用于回购股票，投资者的每股收益只能增长4.34%。现在，苹果正面临着巴菲特认为所有回购都将面临的挑战。苹果股票的价值是否真的超过了每股292美元？多年来，苹果公司的市盈率一直低于标普指数的平均水平；但今天23倍的市盈率却比该指数的基准水平20倍高出15%。按照这个价格进行股票回购依旧划算吗？
对股票回购听之任之，不加干涉是最佳选择吗？
苹果公司高企的股价意味着公司应该考虑，回购股票是否依旧是为公司带来巨额收益的珍贵大礼包。
其实最好的方案是加大对创新、高增长产品的投资，但苹果显然不可能这样做。
一直以来，通过回购股票和发放股息，苹果将其自由现金流100%返还给了投资者。而苹果选择这样做意味着，它没有新的机会把大量自由现金流投入到有利可图的新产品当中，让公司利润上一个台阶。投资组合经理兼首席会计专家杰克·西谢尔斯基表示：“苹果将现金用于业务投资，回报率高达17%。最好的解决方案是找到能够带来类似回报率的新投资项目。比如，如果项目的投资回报率达到15%，就能带动营收的大幅增长。苹果每个季度都在积累大量现金，却无法通过重新投资获得丰厚的回报。”
目前，苹果约25%的收入用于发放股息，股息率为1.1%，依旧保守。当然，我们不知道苹果是否有没有公开的突破性的大计划，较低的股息发放率只是为了维持公司经营的灵活性。我们为苹果高层之所以不进行再投资，假设一个合理的理由：发明下一代iPhone或iPad的难度太大。所以苹果的选择只剩下储备多少现金，多少现金用来发放股息，多少钱划拨给其最钟爱的渠道：回购股票。
苹果有充足的空间可以提高股息。股息支付率从25%提高到35%，将给期望获得本期收益的投资者带来更高回报。巴菲特经常说，公司既要通过回购实现股东增加所有权股份的愿望，也要满足投资者对于稳定现金发放的需求。但对于另外65%的现金流，苹果没有好的选择。如果放弃股票回购，选择囤积现金，把这笔钱存在国库里所得到的回报微乎其微。
继续回购大量股票也不是好的方案。假如未来四个季度，苹果公司不等到股价恢复到传统公允价值，而是以290美元的价格回购价值700亿美元的股票，几个月后，其市盈率从23倍恢复到16倍。实际上于苹果额外支出了45%，浪费了300亿美元。
西谢尔斯基指出，即使以高价回购股票，也比进行溢价收购“营造帝国”更加可取，而苹果很聪明地避开了这个陷阱。或许苹果所代表的舒适和稳定，永久提升了它的价值，它给投资者带来的安全感也确实值得一个溢价倍数。在这种情况下，继续进行大规模股票回购是合理的。这种情况有可能出现，但概率不高。理论上，最合理的方案是囤积现金，在股价明显较低或相对公允的时候回购大量股票。这样做可能更符合巴菲特的标准。但你很难放弃一种众所周知取得巨大成功的传统。
唯一确定的结论要靠数字说话。如果投资者考虑按当前的高价购买苹果股票，他们应该想到苹果公司进行大规模回购不会像以前一样产生巨大的反响。如果安全港的光环褪去，估值也回归传统的中等估值，这时候苹果再像往常一样回购股票，会将避免损失的屏障，变成遭遇惨痛损失之后无用的安慰。（财富中文网）
译者：Biz
过去五年，苹果公司通过精明的回购措施，为股东带来了巨大的回报。在股价较低的时候，回购是一种极好的策略，但现在股价并不便宜，所以回购股票策略显得不够灵活，让人不禁产生怀疑。
在5月2日召开的伯克希尔哈撒韦公司虚拟股东会议上，沃伦·巴菲特坚决维护股票回购这种做法。他宣称：“现在反对回购在政治上是非常正确的。”巴菲特指出，美国联邦政府的COVID-19救济计划禁止贷款和补助金的接受人回购股票，这显示出现在流行跟风“呼喊公司回购股票是多么糟糕”。但是，巴菲特又重申了他常说的一种观点，即通过回购向投资者返现成为时下最流行的一种方式，这种方式是有价值且和负责任的，因为投资者“无论是否愿意”，都可以积累所有权股本，且无需被迫动用其应税股息年度利润分成。
巴菲特补充了一句很重要的话：股票回购应该适时进行，不应该变成惯例。他说：“公司应该在股价低于实际价值的时候回购股票。如果股票价值低于其实际价值，这时候不回购股票是巨大的错误。”巴菲特警告称，如果就某一个特定年份公布数十亿美元的股票回购计划，即使股票定价过高，也会导致管理层囤积大量股票。巴菲特表示：“你听过有些公司说我们要花50亿美元或100亿美元回购股票，就好像你说我今年要花50亿美元或者100亿美元收购某家公司一样，你根本不知道你用这笔钱能得到什么。”
巴菲特的公司伯克希尔哈撒韦持有价值700亿美元的苹果公司股票，占其总投资组合的四分之一左右。作为iPhone制造商的苹果每年都会大手笔回购股票，这在美国公司中堪称另类，但伯克希尔却因此赚得盆满钵满，而且巴菲特是苹果CEO蒂姆·库克及其管理高层的超级拥趸。但苹果在股价高企之际承诺继续回购，这时候按照巴菲特的标准提出的问题似乎合乎逻辑：“股票回购之王”对自己的股票如此迷恋，以至于愿意以任何价格回购吗？
苹果公司以前的回购策略带来了丰厚回报
在4月30日发布的第二季度财报中，苹果宣布将增加500亿美元股票回购计划，总回购规模达到905亿美元。苹果公司慷慨进行股票回购并不令人意外：过去五年，回购一直是其回报股东最强有力的工具。
自2014年10月1日至2020年3月（苹果的财报年度截止于9月30日），苹果公司的自由现金流达到3,210亿美元，其中共有2,780亿美元即86%被用于股票回购。事实证明，该政策取得了巨大的成功。苹果回购股票支付的平均价格为每股160美元，比其五月初的291美元低45%。过去五年半，苹果公司的流通股减少了26%，从58.65亿股减少到43.34亿股。自2014年以来持有苹果公司股票的股东们发现，公司的定期回购计划使他们的利润分成增加了超过四分之一。巴菲特把苹果公司作为研究案例，证明股票回购的优点。
股票回购对于苹果公司尤其重要，因为虽然公司利润庞大，但却很少能实现增长。2015年至2019年，苹果的营收增长幅度不足4%，只是从534亿美元增长到了553亿美元。但其每股收益却上涨了近29%。苹果通过大规模回购，使流通股减少了25%，所以每股收益上涨了约90%。2020财年，回购应该依旧是每股收益上涨的主要动力，因为公司营收最多可能与上一财年持平。苹果披露称，中国的供应链问题将延误其5G手机iPhone 12的发布，而COVID-19疫情对消费者支出的影响也导致其高价旗舰iPhone手机的销量增长缓慢。
去年市场突然开始改变对苹果股票的定价
一直到最近，苹果通过低价回购股票获得了巨大的好处。从2014年10月至2019年年中，苹果公司的平均市盈率倍数约为16倍。事实上，投资者对苹果的价值评估，与其数据所体现的价值是一致的，苹果公司是一个令人惊叹的赚钱机器，赚取了海量现金却几乎没有增长。但去年7月，苹果公司作为FAANG俱乐部（还包括Facebook、亚马逊（Amazon）、奈飞（Netflix）和谷歌（Google）等高增长股票）的一员，似乎绽放出新的魅力。突然之间，投资者对苹果股票的定价不再是把它视为一支可靠的传统股票，而是“高大上”的FAANG股票。从2019年夏到今年2月份的市场最高点，苹果股价从不到200美元上涨到325美元，涨幅高达65%，轻松超过了标普500指数。
令人惊奇的是，这种神奇的走势几乎没有因为新冠疫情危机受到影响。5月4日，苹果股价为292美元，自危机爆发以来仅下跌了10%。在股价大幅上涨期间，苹果公司的净收益并没有增长，依旧与往常一样平淡。公司的股价突然开始与基本利润脱钩，并从此一飞冲天。即使到现在，苹果的市盈率倍数依旧为23倍，比股价暴涨之前的五年平均水平高出44%。
简而言之，投资者在几个月内把苹果变成了一支增长股，而在疫情爆发之后，投资者又把它视为这个风雨飘摇的时代最安全的避风港。当苹果股价较低的时候，人们似乎不需要花心思思考回购股票是否合理，但在股票价格大幅上涨的今天，这个策略却显得更加可疑。
股价上涨并没有减慢苹果的脚步。从去年10月到今年3月，苹果在六个月内斥资385亿美元回购股票，回购价格为285美元，是前五年147美元平均价格的两倍。
股价大幅上涨降低了回购的价值
2018年，苹果回购了价值730亿美元的股票，令人震惊，当时其市盈率约为16倍。这相当于苹果每花掉1美元回购股票，其每股收益增加6.25美分或6.25%。2015年和2016年的市盈率倍数分别为14倍（每股收益增长7.1%）和12倍（每股收益增长8.3%），回购股票带来的回报更高。
但目前苹果的市盈率为23倍，其每花掉1美元用于回购股票，投资者的每股收益只能增长4.34%。现在，苹果正面临着巴菲特认为所有回购都将面临的挑战。苹果股票的价值是否真的超过了每股292美元？多年来，苹果公司的市盈率一直低于标普指数的平均水平；但今天23倍的市盈率却比该指数的基准水平20倍高出15%。按照这个价格进行股票回购依旧划算吗？
对股票回购听之任之，不加干涉是最佳选择吗？
苹果公司高企的股价意味着公司应该考虑，回购股票是否依旧是为公司带来巨额收益的珍贵大礼包。
其实最好的方案是加大对创新、高增长产品的投资，但苹果显然不可能这样做。
一直以来，通过回购股票和发放股息，苹果将其自由现金流100%返还给了投资者。而苹果选择这样做意味着，它没有新的机会把大量自由现金流投入到有利可图的新产品当中，让公司利润上一个台阶。投资组合经理兼首席会计专家杰克·西谢尔斯基表示：“苹果将现金用于业务投资，回报率高达17%。最好的解决方案是找到能够带来类似回报率的新投资项目。比如，如果项目的投资回报率达到15%，就能带动营收的大幅增长。苹果每个季度都在积累大量现金，却无法通过重新投资获得丰厚的回报。”
目前，苹果约25%的收入用于发放股息，股息率为1.1%，依旧保守。当然，我们不知道苹果是否有没有公开的突破性的大计划，较低的股息发放率只是为了维持公司经营的灵活性。我们为苹果高层之所以不进行再投资，假设一个合理的理由：发明下一代iPhone或iPad的难度太大。所以苹果的选择只剩下储备多少现金，多少现金用来发放股息，多少钱划拨给其最钟爱的渠道：回购股票。
苹果有充足的空间可以提高股息。股息支付率从25%提高到35%，将给期望获得本期收益的投资者带来更高回报。巴菲特经常说，公司既要通过回购实现股东增加所有权股份的愿望，也要满足投资者对于稳定现金发放的需求。但对于另外65%的现金流，苹果没有好的选择。如果放弃股票回购，选择囤积现金，把这笔钱存在国库里所得到的回报微乎其微。
继续回购大量股票也不是好的方案。假如未来四个季度，苹果公司不等到股价恢复到传统公允价值，而是以290美元的价格回购价值700亿美元的股票，几个月后，其市盈率从23倍恢复到16倍。实际上于苹果额外支出了45%，浪费了300亿美元。
西谢尔斯基指出，即使以高价回购股票，也比进行溢价收购“营造帝国”更加可取，而苹果很聪明地避开了这个陷阱。或许苹果所代表的舒适和稳定，永久提升了它的价值，它给投资者带来的安全感也确实值得一个溢价倍数。在这种情况下，继续进行大规模股票回购是合理的。这种情况有可能出现，但概率不高。理论上，最合理的方案是囤积现金，在股价明显较低或相对公允的时候回购大量股票。这样做可能更符合巴菲特的标准。但你很难放弃一种众所周知取得巨大成功的传统。
唯一确定的结论要靠数字说话。如果投资者考虑按当前的高价购买苹果股票，他们应该想到苹果公司进行大规模回购不会像以前一样产生巨大的反响。如果安全港的光环褪去，估值也回归传统的中等估值，这时候苹果再像往常一样回购股票，会将避免损失的屏障，变成遭遇惨痛损失之后无用的安慰。（财富中文网）
译者：Biz
For the past half decade, Apple greatly enriched its shareholders by shrewdly deploying buybacks. But the approach that was a splendid gambit when its shares were cheap is looking like a rigid, questionable strategy now that they’re far from a bargain.
At Berkshire Hathaway's virtual shareholder meeting on May 2, Warren Buffett delivered a staunch defense of share buybacks. “It’s very politically correct to be against buybacks,” he declared. The federal COVID-19 relief programs, Buffett noted, ban recipients of loans and grants from repurchasing shares, underscoring how “fashionable” it’s become to join “the cry about how terrible it is that companies have bought back stock.” But Buffett reprised his oft-stated conviction that what’s become the most popular practice of returning cash to investors is valuable and responsible because it allows them to build their ownership stakes without being forced to take their share of annual profits in taxable dividends, “whether they want them or not.”
Buffett added an important proviso: Repurchases should be opportunistic, not routine. “Companies should buy [stock] back below what they think it’s worth,” he said. “If the stock is selling below what it’s worth, it’s a big mistake not to buy the stock.” Buffett cautioned that announcing a multibillion buyback program for a given year can lock management into loading up on shares even if they’re overpriced. “You hear about all these programs where we’re going to spend $5 billion or $10 billion, and that’s like saying you’re buying some business this year for $5 billion or $10 billion and not knowing what you’re going to get for the money,” Buffett warned.
Buffett’s Berkshire Hathaway holds $70 billion in Apple stock, amounting to around one-quarter of its total portfolio. Berkshire has profited handsomely from the iPhone-maker’s policy of giant annual repurchases, the likes of which corporate America has never seen, and Buffett is a big fan of CEO Tim Cook and its top management. But Apple’s pledge to keep repurchases rolling when its stock hovers at lofty valuations makes it logical to apply Buffett’s standard and pose the question: Is the king of buybacks so infatuated with its own shares that it will keep buying at any price?
In the past, Apple’s buyback strategy has paid off big-time
In its seond-quarter earnings release on April 30, Apple announced that it’s adding $50 billion to its repurchase program, bringing the total available to $90.5 billion. It’s hardly surprising that Apple richly replenished the buyback pool: Over the past half decade, repurchases have long been its strongest lever for rewarding shareholders.
Over fiscal years starting on Oct. 1, 2014 (Apple’s fiscal year ends Sept. 30) through March 2020, Apple generated $321 billion in free cash flow and channeled $278 billion, or 86%, into repurchases. That policy proved a big success. Apple paid an average price of $160 per share, a 45% discount to its early May level of $291. Over those five-and-a-half years, Apple has shrunk the number of shares outstanding by over 26%, from 5.865 to 4.334 billion. Shareholders who’ve owned Apple since 2014 have seen their stake in its profits grow by more than a quarter thanks to that regular program of buybacks. That’s a case study in what Buffett calls the virtue of buybacks.
Buybacks were particularly essential for Apple, because its profits, though gigantic, barely grew. From 2015 to 2019, Apple’s earnings budged less than 4% from $53.4 billion to $55.3 billion. Yet its earnings per share jumped almost 29%. It was the big buybacks that by lowering the float by 25% drove roughly 90% of the full increase in EPS. For fiscal year 2020, repurchases once again should account for almost all of any rise in EPS, because earnings are likely to stay flat at best. Apple disclosed that problems with its supply chain in China will delay the launch of its 5G product, the iPhone 12, and COVID-19’s hit to consumer spending is slowing sales of pricey flagship iPhones.
The market radically repriced Apple last year
Until recently, Apple was garnering outsize benefits because it was buying cheap. From October 2014 to mid-2019, its price-to-earnings multiple averaged around 16. In effect, investors were valuing Apple as what its numbers portrayed, a wondrous machine that generated incredible amounts of cash but barely grew. But in July of last year, Apple seemed to take on new glamour as part of the FAANG club that includes Facebook, Amazon, Netflix and Google, all go-go growth stocks. Suddenly, investors started pricing Apple a lot less like an old reliable, and more like a swaggering FAANG. From summer 2019 to the market peak in February, its shares jumped from under $200 to $325, a 65% climb that handily beat the S&P 500.
Amazingly, the coronavirus crisis barely dimmed the magic. On May 4, Apple shares stood at $292, a retreat of just 10% since the crisis struck. Over the period of this epic run-up, Apple’s net earnings weren’t ascending, they were flat as usual. Its stock price suddenly uncoupled from its underlying profits, and took flight. Even now, its P/E sits at 23, 44% higher than its five-year average prior to the takeoff.
Put simply, in a matter of months, investors recast Apple as a growth stock, then when the virus crisis struck, recast it again as the safest of safe havens in the storm of the century. Suddenly, buybacks that looked like a no-brainer when Apple was a steal look a lot more questionable at its new, premium valuation.
The big rise in price didn't slow Apple's campaign. In the six months from October through March, it spent $38.5 billion buying back shares at $285, almost twice the $147 average for the previous five years.
The big run-up makes buybacks far less valuable
When Apple repurchased a staggering $73 billion in stock during 2018, it was paying a P/E of around 16. So for every dollar spent, Apple raised EPS by 6.25¢, or 6.25%. The deals were even sweeter at multiples of 14 (plus 7.1% for EPS) in 2015 and 12 (plus 8.3%) in 2016.
But at to today’s P/E of 23, Apple’s investors will only garner EPS gains of 4.34% for each dollar of buybacks. Now, Apple is facing the challenge Buffett posed for all buybacks. Is Apple stock really worth more than $292 per share? For years, Apple’s P/E lagged far behind the S&P average; today, its multiple of 23 floats 15% above the index’s benchmark of 20. At these prices, are buybacks still a good deal?
Is going on autopilot with buybacks the best option?
Apple’s elevated price means it should be questioning whether buybacks should remain the prized package for its immense earnings.
The best option would be the one Apple apparently isn’t able to exploit: reinvesting heavily in innovative, high-growth products.
Between buybacks and dividends, Apple has long been returning over 100% of its free cash flow to investors. That choice suggests that it lacks new opportunities to invest significant portions of its free cash flow in profitable new products that would drive profits to fresh heights. “Apple is generating 17% returns on the cash already invested in its businesses,” says Jack Ciesielski, a portfolio manager and leading accounting expert. “The best solution would be finding new investments that would produce returns anywhere near those levels. New projects that return, say 15%, would generate strong earnings growth. They’re gushing cash on a quarterly basis, but can’t make a good return by reinvesting it.”
Today, Apple distributes around 25% of its earnings in dividends for a yield of just 1.1%, maintaining a conservative payout rate. Of course, we don’t know if Apple has big plans for breakthroughs that aren’t yet public, and sets the ratio low to maintain flexibility. We’ll assume that Apple’s superb management isn’t reinvesting much for a sound reason: It’s tough to invent the next iPhone or iPad. So the choices distill to how much to hoard in cash, how much to pay out in dividends, and how much to keep plowing into Apple’s favorite channel, buying back stock.
Apple does have plenty of room to comfortably raise its dividend. By lifting its payout ratio from 25% to 35%, it would better reward investors looking for current income. Buffett frequently says that companies should serve both shareholders looking to build their ownership via buybacks, and those seeking steady cash distributions. But Apple has no good choices for the other 65% of its cash flow. If it eschews buybacks and accumulates cash, it will garner tiny returns parking that burgeoning stockpile in the likes of Treasuries.
Nor is continuing to repurchase gigantic blocks of stock a great option. Say Apple spends $70 billion in the next four quarters on buybacks at a price of $290, and months later, its P/E reverts from 23 to 16. It will have effectively overpaid by 45%, and wasted $30 billion versus what it would have spent if it had waited for what’s traditionally been fair value.
As Ciesielski points out, buying in shares, even at high prices, is preferable to “empire building” by overpaying for acquisitions, a pitfall Apple has wisely avoided. Or perhaps the comfort and stability that Apple epitomizes has permanently raised its value, and that safety does merit a premium multiple. In that case, continuing big buybacks makes sense. That scenario’s possible but unlikely. On paper, the best option might be to conserve cash and buy back loads of stock when Apple is obviously cheap or fairly priced. That course might better satisfy the Buffett criteria. But it’s tough to depart from a tradition that’s been so famously successful.
The only clear conclusion is the one dictated by the numbers. For folks thinking of buying Apple at today’s rich prices, consider that those huge buybacks won’t deliver nearly the bang they used to. And if the safe haven halo fades, and Apple reverts to its traditional middling valuation, the return to the old normal would turn what looked like shelter into the cold comfort of stinging losses.
