Apple CEO Tim Cook attends the second season premiere of "Ted Lasso" at the Pacific Design Center in West Hollywood, California.
Apple closed the day just short of a $3 trillion market value after it briefly became the first company to do so.
The power of Apple's capital return program is demonstrated by the relentless rise of Apple's stock. Apple has been the biggest issuer of its own shares in the S&P 500 in the past few years.
In Apple's fiscal 2021, the company spent over $90 billion to buy back shares and pay dividends. Apple spends more money on buying back its shares than other companies, including Meta Platforms, Bank of America, and Oracle.
The stock price of a company is boosted by the reduction of the supply of shares in the market. Earnings per share are a metric used by value-based investors to judge a stock.
In March 2012 Apple began to pay dividends and buy back its shares. According to S&P Global Market Intelligence, Apple has spent over $467 billion on share purchases since then.
Apple's stock is up 252% since August of last year, when it hit a $1 trillion value. The company's share count has been reduced due to the company's share buy back program.
Apple's large cash flow and willingness to return that money to investors is helping investors see it as a quality trade.
In a December note, Bank of America Securities analyst Wamsi Mohan wrote that the recent rally in shares may reflect investor expectations of relatively stable demand and continued strong cash flows and capital return for a stock that has performed largely in-line with the market.
One reason why investors think Apple can continue to spend a lot on share purchases is the fact that it has a lot of cash. Apple had $104 billion in cash flow in its fiscal year. Microsoft and Alphabet had cash flows of about $65 billion and $77 billion, respectively, during their most recent fiscal years.
Tim Cook has said that Apple's total cash will equal its total debt when it becomes net cash neutral, which could allow the company to continue its capital return program even when it becomes net cash neutral.
In December of last year, Apple said that it would no longer maintain its huge cash pile and would return it to investors over time.
The pace of Apple's purchases quickly increased from $33 billion in fiscal 2017 to $73 billion in fiscal 2018. Luca Maestri, Apple's CFO, said at the time that the company had $66 billion in net cash. Net cash from when the decision was announced was about $163 billion.
In November of last year, Bernstein analyst Toni Sacconaghi predicted that Apple would be able to continue its capital return program without taking on net debt through the year 2026.
In April, Apple usually gives investors an update on its shareholder return plans. Apple is expected to raise its dividend by 10% and announce another $90 billion in purchases.
