過去五年,,蘋果公司通過精明的回購措施,,為股東帶來了巨大的回報。在股價較低的時候,,回購是一種極好的策略,,但現(xiàn)在股價并不便宜,所以回購股票策略顯得不夠靈活,,讓人不禁產(chǎn)生懷疑,。
在5月2日召開的伯克希爾哈撒韋公司虛擬股東會議上,沃倫·巴菲特堅決維護股票回購這種做法,。他宣稱:“現(xiàn)在反對回購在政治上是非常正確的,。”巴菲特指出,,美國聯(lián)邦政府的COVID-19救濟計劃禁止貸款和補助金的接受人回購股票,,這顯示出現(xiàn)在流行跟風(fēng)“呼喊公司回購股票是多么糟糕”。但是,,巴菲特又重申了他常說的一種觀點,,即通過回購向投資者返現(xiàn)成為時下最流行的一種方式,這種方式是有價值且和負責(zé)任的,,因為投資者“無論是否愿意”,,都可以積累所有權(quán)股本,,且無需被迫動用其應(yīng)稅股息年度利潤分成。
巴菲特補充了一句很重要的話:股票回購應(yīng)該適時進行,,不應(yīng)該變成慣例,。他說:“公司應(yīng)該在股價低于實際價值的時候回購股票。如果股票價值低于其實際價值,,這時候不回購股票是巨大的錯誤,。”巴菲特警告稱,,如果就某一個特定年份公布數(shù)十億美元的股票回購計劃,,即使股票定價過高,也會導(dǎo)致管理層囤積大量股票,。巴菲特表示:“你聽過有些公司說我們要花50億美元或100億美元回購股票,,就好像你說我今年要花50億美元或者100億美元收購某家公司一樣,你根本不知道你用這筆錢能得到什么,?!?/p>
巴菲特的公司伯克希爾哈撒韋持有價值700億美元的蘋果公司股票,占其總投資組合的四分之一左右,。作為iPhone制造商的蘋果每年都會大手筆回購股票,,這在美國公司中堪稱另類,但伯克希爾卻因此賺得盆滿缽滿,,而且巴菲特是蘋果CEO蒂姆·庫克及其管理高層的超級擁躉,。但蘋果在股價高企之際承諾繼續(xù)回購,這時候按照巴菲特的標準提出的問題似乎合乎邏輯:“股票回購之王”對自己的股票如此迷戀,,以至于愿意以任何價格回購嗎,?
蘋果公司以前的回購策略帶來了豐厚回報
在4月30日發(fā)布的第二季度財報中,蘋果宣布將增加500億美元股票回購計劃,,總回購規(guī)模達到905億美元,。蘋果公司慷慨進行股票回購并不令人意外:過去五年,回購一直是其回報股東最強有力的工具,。
自2014年10月1日至2020年3月(蘋果的財報年度截止于9月30日),,蘋果公司的自由現(xiàn)金流達到3,210億美元,,其中共有2,780億美元即86%被用于股票回購,。事實證明,該政策取得了巨大的成功,。蘋果回購股票支付的平均價格為每股160美元,,比其五月初的291美元低45%。過去五年半,,蘋果公司的流通股減少了26%,,從58.65億股減少到43.34億股,。自2014年以來持有蘋果公司股票的股東們發(fā)現(xiàn),公司的定期回購計劃使他們的利潤分成增加了超過四分之一,。巴菲特把蘋果公司作為研究案例,,證明股票回購的優(yōu)點。
股票回購對于蘋果公司尤其重要,,因為雖然公司利潤龐大,,但卻很少能實現(xiàn)增長。2015年至2019年,,蘋果的營收增長幅度不足4%,,只是從534億美元增長到了553億美元。但其每股收益卻上漲了近29%,。蘋果通過大規(guī)?;刭彛沽魍ü蓽p少了25%,,所以每股收益上漲了約90%,。2020財年,回購應(yīng)該依舊是每股收益上漲的主要動力,,因為公司營收最多可能與上一財年持平,。蘋果披露稱,中國的供應(yīng)鏈問題將延誤其5G手機iPhone 12的發(fā)布,,而COVID-19疫情對消費者支出的影響也導(dǎo)致其高價旗艦iPhone手機的銷量增長緩慢,。
去年市場突然開始改變對蘋果股票的定價
一直到最近,蘋果通過低價回購股票獲得了巨大的好處,。從2014年10月至2019年年中,,蘋果公司的平均市盈率倍數(shù)約為16倍。事實上,,投資者對蘋果的價值評估,,與其數(shù)據(jù)所體現(xiàn)的價值是一致的,蘋果公司是一個令人驚嘆的賺錢機器,,賺取了海量現(xiàn)金卻幾乎沒有增長,。但去年7月,蘋果公司作為FAANG俱樂部(還包括Facebook,、亞馬遜(Amazon),、奈飛(Netflix)和谷歌(Google)等高增長股票)的一員,似乎綻放出新的魅力,。突然之間,,投資者對蘋果股票的定價不再是把它視為一支可靠的傳統(tǒng)股票,而是“高大上”的FAANG股票,。從2019年夏到今年2月份的市場最高點,,蘋果股價從不到200美元上漲到325美元,,漲幅高達65%,輕松超過了標普500指數(shù),。
令人驚奇的是,,這種神奇的走勢幾乎沒有因為新冠疫情危機受到影響。5月4日,,蘋果股價為292美元,,自危機爆發(fā)以來僅下跌了10%。在股價大幅上漲期間,,蘋果公司的凈收益并沒有增長,,依舊與往常一樣平淡。公司的股價突然開始與基本利潤脫鉤,,并從此一飛沖天,。即使到現(xiàn)在,蘋果的市盈率倍數(shù)依舊為23倍,,比股價暴漲之前的五年平均水平高出44%,。
簡而言之,投資者在幾個月內(nèi)把蘋果變成了一支增長股,,而在疫情爆發(fā)之后,,投資者又把它視為這個風(fēng)雨飄搖的時代最安全的避風(fēng)港。當蘋果股價較低的時候,,人們似乎不需要花心思思考回購股票是否合理,,但在股票價格大幅上漲的今天,這個策略卻顯得更加可疑,。
股價上漲并沒有減慢蘋果的腳步,。從去年10月到今年3月,蘋果在六個月內(nèi)斥資385億美元回購股票,,回購價格為285美元,,是前五年147美元平均價格的兩倍。
股價大幅上漲降低了回購的價值
2018年,,蘋果回購了價值730億美元的股票,,令人震驚,當時其市盈率約為16倍,。這相當于蘋果每花掉1美元回購股票,,其每股收益增加6.25美分或6.25%。2015年和2016年的市盈率倍數(shù)分別為14倍(每股收益增長7.1%)和12倍(每股收益增長8.3%),,回購股票帶來的回報更高,。
但目前蘋果的市盈率為23倍,其每花掉1美元用于回購股票,,投資者的每股收益只能增長4.34%?,F(xiàn)在,蘋果正面臨著巴菲特認為所有回購都將面臨的挑戰(zhàn),。蘋果股票的價值是否真的超過了每股292美元,?多年來,蘋果公司的市盈率一直低于標普指數(shù)的平均水平,;但今天23倍的市盈率卻比該指數(shù)的基準水平20倍高出15%,。按照這個價格進行股票回購依舊劃算嗎?
對股票回購聽之任之,,不加干涉是最佳選擇嗎,?
蘋果公司高企的股價意味著公司應(yīng)該考慮,回購股票是否依舊是為公司帶來巨額收益的珍貴大禮包,。
其實最好的方案是加大對創(chuàng)新,、高增長產(chǎn)品的投資,但蘋果顯然不可能這樣做,。
一直以來,,通過回購股票和發(fā)放股息,蘋果將其自由現(xiàn)金流100%返還給了投資者,。而蘋果選擇這樣做意味著,,它沒有新的機會把大量自由現(xiàn)金流投入到有利可圖的新產(chǎn)品當中,讓公司利潤上一個臺階,。投資組合經(jīng)理兼首席會計專家杰克·西謝爾斯基表示:“蘋果將現(xiàn)金用于業(yè)務(wù)投資,,回報率高達17%。最好的解決方案是找到能夠帶來類似回報率的新投資項目,。比如,,如果項目的投資回報率達到15%,就能帶動營收的大幅增長,。蘋果每個季度都在積累大量現(xiàn)金,,卻無法通過重新投資獲得豐厚的回報?!?/p>
目前,,蘋果約25%的收入用于發(fā)放股息,股息率為1.1%,,依舊保守,。當然,我們不知道蘋果是否有沒有公開的突破性的大計劃,,較低的股息發(fā)放率只是為了維持公司經(jīng)營的靈活性,。我們?yōu)樘O果高層之所以不進行再投資,假設(shè)一個合理的理由:發(fā)明下一代iPhone或iPad的難度太大,。所以蘋果的選擇只剩下儲備多少現(xiàn)金,,多少現(xiàn)金用來發(fā)放股息,,多少錢劃撥給其最鐘愛的渠道:回購股票。
蘋果有充足的空間可以提高股息,。股息支付率從25%提高到35%,,將給期望獲得本期收益的投資者帶來更高回報。巴菲特經(jīng)常說,,公司既要通過回購實現(xiàn)股東增加所有權(quán)股份的愿望,,也要滿足投資者對于穩(wěn)定現(xiàn)金發(fā)放的需求。但對于另外65%的現(xiàn)金流,,蘋果沒有好的選擇,。如果放棄股票回購,選擇囤積現(xiàn)金,,把這筆錢存在國庫里所得到的回報微乎其微,。
繼續(xù)回購大量股票也不是好的方案。假如未來四個季度,,蘋果公司不等到股價恢復(fù)到傳統(tǒng)公允價值,,而是以290美元的價格回購價值700億美元的股票,幾個月后,,其市盈率從23倍恢復(fù)到16倍,。實際上于蘋果額外支出了45%,浪費了300億美元,。
西謝爾斯基指出,,即使以高價回購股票,也比進行溢價收購“營造帝國”更加可取,,而蘋果很聰明地避開了這個陷阱,。或許蘋果所代表的舒適和穩(wěn)定,,永久提升了它的價值,,它給投資者帶來的安全感也確實值得一個溢價倍數(shù)。在這種情況下,,繼續(xù)進行大規(guī)模股票回購是合理的,。這種情況有可能出現(xiàn),但概率不高,。理論上,,最合理的方案是囤積現(xiàn)金,在股價明顯較低或相對公允的時候回購大量股票,。這樣做可能更符合巴菲特的標準,。但你很難放棄一種眾所周知取得巨大成功的傳統(tǒng)。
唯一確定的結(jié)論要靠數(shù)字說話。如果投資者考慮按當前的高價購買蘋果股票,,他們應(yīng)該想到蘋果公司進行大規(guī)?;刭彶粫褚郧耙粯赢a(chǎn)生巨大的反響。如果安全港的光環(huán)褪去,,估值也回歸傳統(tǒng)的中等估值,,這時候蘋果再像往常一樣回購股票,,會將避免損失的屏障,,變成遭遇慘痛損失之后無用的安慰。(財富中文網(wǎng))
譯者:Biz
過去五年,,蘋果公司通過精明的回購措施,,為股東帶來了巨大的回報。在股價較低的時候,,回購是一種極好的策略,,但現(xiàn)在股價并不便宜,所以回購股票策略顯得不夠靈活,,讓人不禁產(chǎn)生懷疑,。
在5月2日召開的伯克希爾哈撒韋公司虛擬股東會議上,沃倫·巴菲特堅決維護股票回購這種做法,。他宣稱:“現(xiàn)在反對回購在政治上是非常正確的,。”巴菲特指出,,美國聯(lián)邦政府的COVID-19救濟計劃禁止貸款和補助金的接受人回購股票,,這顯示出現(xiàn)在流行跟風(fēng)“呼喊公司回購股票是多么糟糕”。但是,,巴菲特又重申了他常說的一種觀點,,即通過回購向投資者返現(xiàn)成為時下最流行的一種方式,這種方式是有價值且和負責(zé)任的,,因為投資者“無論是否愿意”,,都可以積累所有權(quán)股本,且無需被迫動用其應(yīng)稅股息年度利潤分成,。
巴菲特補充了一句很重要的話:股票回購應(yīng)該適時進行,,不應(yīng)該變成慣例。他說:“公司應(yīng)該在股價低于實際價值的時候回購股票,。如果股票價值低于其實際價值,,這時候不回購股票是巨大的錯誤?!卑头铺鼐娣Q,,如果就某一個特定年份公布數(shù)十億美元的股票回購計劃,即使股票定價過高,也會導(dǎo)致管理層囤積大量股票,。巴菲特表示:“你聽過有些公司說我們要花50億美元或100億美元回購股票,,就好像你說我今年要花50億美元或者100億美元收購某家公司一樣,你根本不知道你用這筆錢能得到什么,?!?/p>
巴菲特的公司伯克希爾哈撒韋持有價值700億美元的蘋果公司股票,占其總投資組合的四分之一左右,。作為iPhone制造商的蘋果每年都會大手筆回購股票,,這在美國公司中堪稱另類,但伯克希爾卻因此賺得盆滿缽滿,,而且巴菲特是蘋果CEO蒂姆·庫克及其管理高層的超級擁躉,。但蘋果在股價高企之際承諾繼續(xù)回購,這時候按照巴菲特的標準提出的問題似乎合乎邏輯:“股票回購之王”對自己的股票如此迷戀,,以至于愿意以任何價格回購嗎,?
蘋果公司以前的回購策略帶來了豐厚回報
在4月30日發(fā)布的第二季度財報中,蘋果宣布將增加500億美元股票回購計劃,,總回購規(guī)模達到905億美元,。蘋果公司慷慨進行股票回購并不令人意外:過去五年,回購一直是其回報股東最強有力的工具,。
自2014年10月1日至2020年3月(蘋果的財報年度截止于9月30日),,蘋果公司的自由現(xiàn)金流達到3,210億美元,其中共有2,780億美元即86%被用于股票回購,。事實證明,,該政策取得了巨大的成功。蘋果回購股票支付的平均價格為每股160美元,,比其五月初的291美元低45%,。過去五年半,蘋果公司的流通股減少了26%,,從58.65億股減少到43.34億股,。自2014年以來持有蘋果公司股票的股東們發(fā)現(xiàn),公司的定期回購計劃使他們的利潤分成增加了超過四分之一,。巴菲特把蘋果公司作為研究案例,,證明股票回購的優(yōu)點。
股票回購對于蘋果公司尤其重要,,因為雖然公司利潤龐大,,但卻很少能實現(xiàn)增長。2015年至2019年,,蘋果的營收增長幅度不足4%,,只是從534億美元增長到了553億美元,。但其每股收益卻上漲了近29%。蘋果通過大規(guī)?;刭?,使流通股減少了25%,所以每股收益上漲了約90%,。2020財年,,回購應(yīng)該依舊是每股收益上漲的主要動力,因為公司營收最多可能與上一財年持平,。蘋果披露稱,,中國的供應(yīng)鏈問題將延誤其5G手機iPhone 12的發(fā)布,而COVID-19疫情對消費者支出的影響也導(dǎo)致其高價旗艦iPhone手機的銷量增長緩慢,。
去年市場突然開始改變對蘋果股票的定價
一直到最近,,蘋果通過低價回購股票獲得了巨大的好處,。從2014年10月至2019年年中,,蘋果公司的平均市盈率倍數(shù)約為16倍。事實上,,投資者對蘋果的價值評估,,與其數(shù)據(jù)所體現(xiàn)的價值是一致的,蘋果公司是一個令人驚嘆的賺錢機器,,賺取了海量現(xiàn)金卻幾乎沒有增長,。但去年7月,蘋果公司作為FAANG俱樂部(還包括Facebook,、亞馬遜(Amazon),、奈飛(Netflix)和谷歌(Google)等高增長股票)的一員,似乎綻放出新的魅力,。突然之間,,投資者對蘋果股票的定價不再是把它視為一支可靠的傳統(tǒng)股票,而是“高大上”的FAANG股票,。從2019年夏到今年2月份的市場最高點,,蘋果股價從不到200美元上漲到325美元,漲幅高達65%,,輕松超過了標普500指數(shù),。
令人驚奇的是,這種神奇的走勢幾乎沒有因為新冠疫情危機受到影響,。5月4日,,蘋果股價為292美元,自危機爆發(fā)以來僅下跌了10%,。在股價大幅上漲期間,,蘋果公司的凈收益并沒有增長,,依舊與往常一樣平淡。公司的股價突然開始與基本利潤脫鉤,,并從此一飛沖天,。即使到現(xiàn)在,蘋果的市盈率倍數(shù)依舊為23倍,,比股價暴漲之前的五年平均水平高出44%,。
簡而言之,投資者在幾個月內(nèi)把蘋果變成了一支增長股,,而在疫情爆發(fā)之后,,投資者又把它視為這個風(fēng)雨飄搖的時代最安全的避風(fēng)港。當蘋果股價較低的時候,,人們似乎不需要花心思思考回購股票是否合理,,但在股票價格大幅上漲的今天,這個策略卻顯得更加可疑,。
股價上漲并沒有減慢蘋果的腳步,。從去年10月到今年3月,蘋果在六個月內(nèi)斥資385億美元回購股票,,回購價格為285美元,,是前五年147美元平均價格的兩倍。
股價大幅上漲降低了回購的價值
2018年,,蘋果回購了價值730億美元的股票,,令人震驚,當時其市盈率約為16倍,。這相當于蘋果每花掉1美元回購股票,,其每股收益增加6.25美分或6.25%。2015年和2016年的市盈率倍數(shù)分別為14倍(每股收益增長7.1%)和12倍(每股收益增長8.3%),,回購股票帶來的回報更高,。
但目前蘋果的市盈率為23倍,其每花掉1美元用于回購股票,,投資者的每股收益只能增長4.34%?,F(xiàn)在,蘋果正面臨著巴菲特認為所有回購都將面臨的挑戰(zhàn),。蘋果股票的價值是否真的超過了每股292美元,?多年來,蘋果公司的市盈率一直低于標普指數(shù)的平均水平,;但今天23倍的市盈率卻比該指數(shù)的基準水平20倍高出15%,。按照這個價格進行股票回購依舊劃算嗎?
對股票回購聽之任之,,不加干涉是最佳選擇嗎,?
蘋果公司高企的股價意味著公司應(yīng)該考慮,,回購股票是否依舊是為公司帶來巨額收益的珍貴大禮包。
其實最好的方案是加大對創(chuàng)新,、高增長產(chǎn)品的投資,,但蘋果顯然不可能這樣做。
一直以來,,通過回購股票和發(fā)放股息,,蘋果將其自由現(xiàn)金流100%返還給了投資者。而蘋果選擇這樣做意味著,,它沒有新的機會把大量自由現(xiàn)金流投入到有利可圖的新產(chǎn)品當中,,讓公司利潤上一個臺階。投資組合經(jīng)理兼首席會計專家杰克·西謝爾斯基表示:“蘋果將現(xiàn)金用于業(yè)務(wù)投資,,回報率高達17%,。最好的解決方案是找到能夠帶來類似回報率的新投資項目。比如,,如果項目的投資回報率達到15%,,就能帶動營收的大幅增長。蘋果每個季度都在積累大量現(xiàn)金,,卻無法通過重新投資獲得豐厚的回報,。”
目前,,蘋果約25%的收入用于發(fā)放股息,股息率為1.1%,,依舊保守,。當然,我們不知道蘋果是否有沒有公開的突破性的大計劃,,較低的股息發(fā)放率只是為了維持公司經(jīng)營的靈活性,。我們?yōu)樘O果高層之所以不進行再投資,假設(shè)一個合理的理由:發(fā)明下一代iPhone或iPad的難度太大,。所以蘋果的選擇只剩下儲備多少現(xiàn)金,,多少現(xiàn)金用來發(fā)放股息,多少錢劃撥給其最鐘愛的渠道:回購股票,。
蘋果有充足的空間可以提高股息,。股息支付率從25%提高到35%,將給期望獲得本期收益的投資者帶來更高回報,。巴菲特經(jīng)常說,,公司既要通過回購實現(xiàn)股東增加所有權(quán)股份的愿望,也要滿足投資者對于穩(wěn)定現(xiàn)金發(fā)放的需求,。但對于另外65%的現(xiàn)金流,,蘋果沒有好的選擇,。如果放棄股票回購,選擇囤積現(xiàn)金,,把這筆錢存在國庫里所得到的回報微乎其微,。
繼續(xù)回購大量股票也不是好的方案。假如未來四個季度,,蘋果公司不等到股價恢復(fù)到傳統(tǒng)公允價值,,而是以290美元的價格回購價值700億美元的股票,幾個月后,,其市盈率從23倍恢復(fù)到16倍,。實際上于蘋果額外支出了45%,浪費了300億美元,。
西謝爾斯基指出,,即使以高價回購股票,也比進行溢價收購“營造帝國”更加可取,,而蘋果很聰明地避開了這個陷阱,。或許蘋果所代表的舒適和穩(wěn)定,,永久提升了它的價值,,它給投資者帶來的安全感也確實值得一個溢價倍數(shù)。在這種情況下,,繼續(xù)進行大規(guī)模股票回購是合理的,。這種情況有可能出現(xiàn),但概率不高,。理論上,,最合理的方案是囤積現(xiàn)金,在股價明顯較低或相對公允的時候回購大量股票,。這樣做可能更符合巴菲特的標準,。但你很難放棄一種眾所周知取得巨大成功的傳統(tǒng)。
唯一確定的結(jié)論要靠數(shù)字說話,。如果投資者考慮按當前的高價購買蘋果股票,,他們應(yīng)該想到蘋果公司進行大規(guī)模回購不會像以前一樣產(chǎn)生巨大的反響,。如果安全港的光環(huán)褪去,,估值也回歸傳統(tǒng)的中等估值,這時候蘋果再像往常一樣回購股票,,會將避免損失的屏障,,變成遭遇慘痛損失之后無用的安慰。(財富中文網(wǎng))
譯者: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.