In wake of a mixed bag of earnings for the first quarter of 2017, Apple has announced that it is increasing its capital return program and also extending the time frame by a significant four quarters. The company will now be able to spend $300 Billion instead of the previously stipulated $250 billion.
What’s more, it will spend the amount by the end of March 2019, instead of 2018. The company will return the said capital in form of share buybacks and dividends. In case you are unaware of it, a capital return or Return of capital program is one in which a company returns such principal payments back to “capital owners” (including shareholders, partners, unit holders) that exceed the growth (in other words, net or taxable income) of the said business.
Apple has been a pretty generous company with regards to capital returns. The company initiated this program in 2012 and since then, has returned a massive $211 Billion to its shareholders in form of dividends and repurchases. The latter formed the bulk of the capital return program with almost $151 Billion worth of stock repurchased.
Apple has also increased share buyback authorization to $210 Billion, up from $175 Billion that was announced a year ago. What’s more, the company has also increased its quarterly dividends by around 10.5 percent. Paradoxically though, Apple does not use its own massive cash reserves to fund this program. Instead, it uses debt markets for cash returns. This is ironic for a company that has over $256 billion in its coffers.
In case you are wondering why, Apple does this so that one, it avoids the massive repatriation tax it will have to dole out if it chose to bring its cash reserves back into the US — since most of it is stored abroad. And two, debt has pretty ow interest rates now a days, so Apple can use that just as well without having to pay out repatriation taxes.
The company will be paying out $.63 per share to stockholders on May 18th, 2017.