Apple’s Investment in Innovation
When it comes to tech giants, few have matched the success of Apple in delivering for investors. The company’s shares have seen a staggering 790% surge over the last decade and a mind-blowing increase of nearly 132,000% since its IPO in December 1980.
Throughout its journey, Apple has relied on two key elements for its success: innovation and a surprising strategic move that has proven to be immensely rewarding for its shareholders.
Image source: Getty Images.
Apple’s Fearless Approach to Innovation
For a company to thrive and become a market leader, innovation is key. Apple, under the leadership of CEO Tim Cook, has consistently invested in research and development (R&D) to stay ahead in the fast-evolving tech landscape.
Since 2013, Apple has allocated over $175 billion to R&D, reflecting its commitment to staying at the forefront of technological advancements.
The company’s robust R&D investment has not only enabled it to maintain a dominant position in the smartphone market but also expand its offerings to include a wide range of popular products and services.
Apple’s Strategic Investment: A Game-Changer
What truly sets Apple apart is not just its innovation but its strategic financial moves that have significantly enriched its shareholders.
In addition to its hefty R&D spending, Apple has undertaken a remarkable “investment” that dwarfs its R&D budget by nearly fourfold. This strategic initiative has played a pivotal role in boosting shareholder wealth.
Image source: Getty Images.
Apple’s Bold Financial Moves
With its strong cash flow, Apple has been able to take calculated risks that set it apart from its peers. The company has not only paid out substantial dividends but also implemented a massive share repurchase program.
Since 2013, Apple has repurchased an astonishing $650.88 billion worth of its common stock, demonstrating its commitment to enhancing shareholder value and solidifying its position as a top player in the market.
Apple’s strategic blend of innovation and financial prowess has not only propelled its growth trajectory but also underscored its unwavering dedication to creating value for its investors.
The Impact of Share Buybacks on Apple’s Earnings Per Share
Share buybacks hold a unique allure for investors, offering a dual benefit that transcends mere financial maneuvering. Firstly, the gradual reduction of outstanding shares enhances the ownership stakes of current shareholders, a concept akin to a blooming garden rewarding those tending to it diligently.
The second, and perhaps more significant, advantage lies in the potential for stock repurchases to bolster a company’s earnings per share (EPS). Companies boasting consistent or escalating net incomes stand to witness an uptick in EPS over time as the share count diminishes. This enhancement can cast a spell of desirability upon a company’s stock for investors with a keen eye on fundamentals.
Take the case of tech giant Apple: despite a dip in net income from $99.8 billion in fiscal 2022 to around $97 billion in fiscal 2023, the company orchestrated a staggering $77.55 billion buyback spree, retiring over 513 million shares. Remarkably, this strategic move propelled Apple’s adjusted EPS to a rise of $0.02, landing at $6.13 per share in 2023, despite the modest dip in net income.
Since the inception of 2013, Apple has gallantly reeled in nearly 11 billion shares of common stock, constituting roughly 41% of its existing shares.
The Long-Lasting Impact of Share Buybacks on Apple
Amid the past 11 years and change, share buybacks have aptly underpinned Apple’s share price ascent, embedding a critical support pillar for the stock. However, the discerning eyes of Wall Street and investors are now cast upon one of the globe’s foremost tech giants, anticipating a rekindling of its growth flames post a halting spell in 2023.
Despite this, as long as Apple persists in the relentless deployment of its resources towards buybacks, a modest expansion of EPS remains within the realm of reason.
Considerations Before Investing in Apple
Contemplating an investment in Apple? Delve into this: the venerable Motley Fool Stock Advisor research squad has pinpointed what they believe to be the 10 best stocks for current investors… with Apple notably missing from the list. The chosen 10 stocks are poised to potentially yield substantial returns in the ensuing years.
The Stock Advisor framework furnishes investors with a lucid blueprint for prosperity, offering counsel on portfolio construction, regular analyst updates, and a bimonthly duo of new stock picks. Notably, the Stock Advisor service has surpassed the S&P 500 returns thrice over since the dawn of 2002.
Curious about these top 10 stocks? Explore further and unveil the choices that could redefine your investment landscape.
*Stock Advisor returns as of February 26, 2024