Tim Cook yesterday revealed that Apple in the last two weeks alone snatched up US$14 billion worth of its own shares. That's an astounding figure that really puts Carl Icahn's investment in Apple to shame. To help put the $14 billion buyback into context, this tweet from Sammy the Walrus IV certainly helps paint an interesting picture.
Apple spent $14 billion buying 3% of itself over the past two weeks, equivalent to roughly four Nests and a Motorola.- Sammy the Walrus IV (@SammyWalrusIV) February 7, 2014
But one aspect of Apple's stock buyback program that not many people seem to appreciate is that it not only helps Apple pad its EPS, but it also works to save Apple a boatload of money on dividends.
Since shares of Apple plummeted following the company's earnings announcement, the company's average share price has been about $506.86. If we apply Apple's $14 billion expenditure to that, we see that Apple recently snatched up 27.624 million shares.
Apple will of course be retiring those shares, but had it not gone on a recent spending spree, those shares would have cost Apple $84.254 million in dividends (27.624 million shares * $3.05 per share) per quarter. Stretched out over a year, Apple will be spending $337 million less on dividends than it would have otherwise. And this of course doesn't even take into account the previous $28 million Apple has spent on stock buybacks
As it stands today -- February 7, 2014 -- Apple has spent $52 billion on stock buybacks and $15.8 billion on dividend payments. Note, though, that Apple's next dividend payment is set for February 10.
Apple's current capital return program has a $100 billion budget, with $60 billion of that amount allocated for stock buybacks. With the $60 billion threshold almost in reach, it'll be interesting to see if Apple announces any changes, buyback-oriented or dividend-wise, soon. On that note, Cook told the Wall Street Journal yesterday that the company will announce an update to its buyback program by April.