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"Apple Cash Return Surpasses $1 Trillion

Apple spent $29 billion on dividends and share buybacks in its latest quarter, pushing the all-time tally on Apple’s cash return program past $1 trillion.
When Tim Cook became Apple CEO in 2011, Steve Jobs left him with a problem: the company had too much cash and no debt. There was $76 billion on the balance sheet, a number that was growing quickly every quarter as the iPhone took off.
Apple prefers not to make big acquisitions, and it was already investing heavily back into the business. The only solution was to do something Jobs had resisted: returning cash to shareholders. By the time Apple paid its first dividend in 2012, the pile had risen past $120 billion, and it topped $140 billion when buybacks began the following year.
Since 2012, Apple has paid $181 billion in dividends and bought back $841 billion of shares. In the process it has reduced the diluted share count by 44%."


From Barrons.

Imagine if Greg amps up buybacks. Of course the price needs to be sensible. Diluted share count down 44% since 2011 is impressive.

Since 2012, Apple has paid $181 billion in dividends and bought back $841 billion of shares. In the process it has reduced the diluted share count by 44%.

Does the article mention how much they increased the diluted share count via ESPP / grants in that period?

This is likely the most important reason for Warren’s purchase. The business has deep moat in the brand but it passed Buffett’s “Watch-what-the-manager-does-with-excess” test. The combination is a lallapalooza. Buffett’s recent buys including OXY follow this theme. Most managements don’t follow this. Somewhat good that there’re not that many. Greg, hopefully finds his own such.

"Does the article mention how much they increased the diluted share count via ESPP / grants in that period?"


Dilute count takes that all into account

So still net 44% down

Apple Cash Return Surpasses $1 Trillion

Not for nuthin’, but I do wish they had gotten into the EV business instead of the “we can sync your phone to your EV” business.

It would have been nice to have a level headed new entrant with design sensibilities, brand recognition, and US ownership take a shot at it. They would have had the cash to make it happen, and an eager customer base ready to pounce.

Perhaps. But Apple understands its/our key advantage: there are no called strikes. Cash compounds. And there are far worse fates than having too much money. Technologies are expensive—and the real advantage often lies not in owning them, but in deciding when—and whether—to use them. Smart societies, and smart corporations, deploy capital selectively.

Apple is a rare case where the hardware still matters more than what has largely become commoditized software—or even the underlying power sources that make it all run.

Investment in new technology almost always benefits consumers and society. We live in a country where progress and productivity are funded—voluntarily—by private capital. History is pretty clear on the outcomes: in autos, aviation, the internet, and countless others, most investors get crushed, some survive, and a very small number make extraordinary returns.

Apple is content to keep the bat on its shoulder and watch the pitches on the edge of the strike zone go by. Many of those pitches happen to be the newest, noisiest technologies.

Apple is content to keep the bat on its shoulder and watch the pitches on the edge of the strike zone go by. Many of those pitches happen to be the newest, noisiest technologies.

Apple has had the bat on its shoulder since Jobs died. He presided over the birth of the phone, the iPad, the App Store, the music & video business, and most of the rest of what powers the company. Since then they have introduced the Watch (meh), the Ear Pods (good), and … produced a substandard Siri/AI product, iterative updates rather than breakthrough products, and milked the ecosystem and creators for a healthy chunk of profit.

I’m surely not criticizing Cook for having produced one of the most valuable companies on the planet, that would be stupid, just that he’s been standing with the bat on his shoulder for 15 years. At some point you *do* have to swing.

I guess I could make the same criticism of Berkshire’s cash pile, so maybe I should just shut up.

“Apple Watch is meh? Really?

Apple is the undisputed global leader in smartwatches and has outsold the entire Swiss watch industry—in units—for seven straight years. It’s not even close. That’s not a side project; that’s the creation and conquest of an entirely new consumer category.

Since Tim Cook took over, Apple hasn’t just ‘played it safe’—the company has grown several-fold from what he inherited, while investing at historic levels in world-leading R&D, supply-chain dominance, and an ecosystem that’s become an almost impenetrable moat. Not EV moonshots, not crypto sideshows—investment in core products and the platform that ties them together.

Yes, Siri and Apple’s AI posture lag—and that needs to be fixed. But this dominance gives Apple something incredibly valuable: time and space. They have a massive, loyal, and unusually forgiving consumer base that allows them to address weaknesses without existential risk. That kind of trust is RARE—and powerful.

And let’s not ignore one of the most shareholder-friendly capital allocation strategies in corporate history: hundreds of billions returned via buybacks, dramatically increasing ownership for long-term holders, us. That’s not financial engineering—it’s confidence in the business.

As for autos? Apple didn’t need to build a car to win. The auto industry hates that consumers insist on Apple CarPlay. GM, Ford, Hyundai, etc —are all effectively forced to cede control of their own in-car software experience to Apple. That’s power. Apple is a major player in auto-across the board--and it's driving the industry nuts! They can't keep Apple out of THEIR OWN VEHICLES.

You can argue Apple isn’t flashy anymore. Fair.

This is disciplined dominance.

<<Apple Cash Return Surpasses $1 Trillion>>

Not for nuthin’, but I do wish they had gotten into the EV business ...

Why? They would have an increased capex of tens of billions and overall gross margin would have dropped like a rock. The auto business is just not a particularly good business. And even if segments of it becomes a good business, that only lasts for a relatively soft time because all the competitors flock to those segments and commoditize it. I've been an Apple shareholder for decades and I don't think this would have been a good idea for the business.

It would have been nice to have a level headed new entrant with design sensibilities, brand recognition, and US ownership take a shot at it. They would have had the cash to make it happen, and an eager customer base ready to pounce.

As I've discussed many times over the years, I would have absolutely LOVED an Apple car. If it worked as well as my iPhones did, it would have been a joy to own. However, I strongly suspect that in order to make it a joy, it would have to be priced significantly above my price range for a car, for any car. So in the end, I wouldn't have enjoyed it at all, other than perhaps a short-term rental to salivate over it for a few days. And because the price range would be so high, volume would be relatively low, and it would never become mass market enough to produce large profits. Again, not a good idea for the business.

I spent $1400 on my last iPhone and was rather uncomfortable spending that much on a mere phone. But at least I could put it in my pocket, put a protector around it, and have an excellent warranty. But heck, I would never leave it out on the street or in a parking lot somewhere!

bought back $841 billion of shares. In the process it has reduced the diluted share count by 44%.

Let us look at Apple as an investor in AAPL would be looked at. Since March of 2012 when it started buyback, Apple has bought a 44% stake in 2012 Apple for $841 billion dollars. Let us pretend that Apple kept all those bought back shares, what would they be worth today? Well, shares are fungible so the 44% of 2012 shares Apple bought back would be worth (44%/56%)*$3.96 Trillion = $3.111 Trillion dollars.

So for $841 billion spent since 2012, Apple has bought back AAPL shares whos current value would be $3111 billion. That is a 170% return on its investment. If they had made the entire investment in 2012, that would be a CAGR of 7.9% which doesn't suck. But in fact Apple spread that investment out over the 13 years since 2012. If the "average" time since Apple made the $841 investment was 6.5 years, that would be a CAGR of 16.5%.

What can we conclude from this?

Well, you sorta have to conclude that Apple made an $841 billion dollar investment over the last 13 years that is currently worth over $3 trillion dollars. That doesn't suck.

I think we could also conclude that on net, Apple has not paid too much for its bought back shares. If it had paid too much, you would not expect it to have made somewhere in the 8% to 17% a year CAGR range which it has apparently made.

Good to know, seems to me.

R:)

Let us pretend that Apple kept all those bought back shares, what would they be worth today?

Interesting question!

Random thoughts:

First, be careful...such discussions are logic minefields. The remaining public shares are only worth as much as they are today because each share implicitly already owns its portion of those treasury shares. You have to be careful not to count that value twice at any step of your hypothetical. Do the treasury shares you're thinking of selling currently get some of their value from owning themselves?

A much simpler way to phrase it:
The public share count has dropped by 11.18 billion shares since 2012. If they issued 11.18 billion shares in new stock today, what aggregate price could they get for it? This share issuance in return for cash would precisely undo the [net] buybacks they've done. So the aggregate price you'd get is today's market value of all the past buybacks.

Even if one assumes there are no liquidity limits, could they get $3.1 trillion ($270 a share) for that secondary? Hard to answer. They'd have to have a story of what they'd do with the money, and we don't know what that would be. (buy Microsoft? the ultimate revenge...)

Perhaps a better measure is, was it good capital allocation on average? What if they had done something else with that money? One suggestion a very long time ago (when Apple was apparently very richly valued) was to buy Berkshire shares (which weren't at the time). Or the S&P 500. One rapidly comes to the conclusion that the only thing that matters is the weighted average valuation level paid, and if valuing by today's situation, the ending market valuation levels.

The shares that were bought cheaply were a spectacular decision. You'd need a table of expenditure by year to see how many that was, which is easy. But you also run into the subtler problem of the change in valuation levels to recent high levels--was that foreseeable? Has all the increase been justified? Are current prices just luck making old decisions look somewhat smarter than they were? Tough to assess.

We don't know what the precise intrinsic value of a share is on any given date, but such a thing does exist. So one thing we know for sure: to the extent that the weighted average valuation level paid was true fair value at the time, no repurchase increased the value of a remaining share. It might however have been a better decision than alternative uses of the money which might have been less than neutral.

Jim

Mungofitch:
Let us pretend that Apple kept all those bought back shares, what would they be worth today?

Interesting question!

Random thoughts:

First, be careful...such discussions are logic minefields.

My conclusion from my analysis is that the $841 billion Apple spent on share repurchases since 2011 had a "Maket Cap" valuation of $3.111 TRILLION today. I say "Market Cap" valuation because, like any Market Cap, it is likely not the amount of money a company could raise by selling an equivalent number of its shares on the market today for a variety of sensible reasons. So as well as we can say "Apple is worth $4Trillion because that is its current market cap" we can say "Apple's investment in buying back its own shares is worth $3.111 Trillion".

So yes, it is a logic minefield. But so are the conflation of "valuation" and "Market Cap". And so is the idea that AAPL shares have a prices intrinsic value on any day, even though no one will ever know what it is until years after, in retrospect.

So I think we walk around the mines instead of over them if we say "to the extent market cap reflects a company's value, the $841 billion of shares Apple has repurchased are currently worth about $3.111 Trillion.

The reason I find this discussion interesting is, I don't currently know how to calculate the optimum amount a company might should spend on share buybacks. Failing to know how to figure the optimum suggests a big uncertainty as to whether Apple is being stupid or not. I thought this calculation, while not being able to address the question of what should Apple have done, what would have been optimum, would at least be able to answer the question, at least as well as Market Cap answers the question for a company as a whole, of what did Apple get for that $841 billion dollar investment. Could they have done better by doing something else? I have no idea, but I do have an idea of how well they did doing the thing they did.

Although I didn't address it explicitly, I tend to resonate with the reasoning that share buybacks only make business sense when they are done for a price lower than the intrinsic value of the shares being bought back. Did Apple's buybacks meet this criterion? I would guess many of us would guess probably not as Apple always seemed to be a high flyer. But if Apple made a CAGR of over 10% on its repurchase investment, so far, then either buying back for less than intrinsic value is not necessary for a good investment, or intrinsic value is "obviously" higher, generally, than AAPL's share price weighted over the buyback period 2012-present.

Is this Market Cap style calculation enough to say Apple has done pretty well with its buybacks, even though we still have no idea how to optimize such a policy?

R:)

You stated a number of points in my thesis of why Apple is exceptional. I first used their products, I believe, in 1981. And haven't stopped. It is my largest individual security holding, by about a factor of 5 over other holdings (though indices dwarf it).

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