Corporate Financing Policy Assignment
Apple Inc.
Apple, Inc. is currently paying a regular quarterly dividend and re-purchasing its stock. It has actually accessed the debt markets (borrowed money) in order to provide the funding to return cash to shareholders. At the time, Apple’s stock at over $110 per share was trading a little below its 52 week high of $121 per share.
Excerpt from 10K: In April 2014, the Company’s Board of Directors increased the share repurchase program authorization from $60 billion to $90 billion of the Company’s common stock, of which $67.9 billion had been utilized as of September 27, 2014. The share repurchase program is expected to be completed by the end of December 2015. The Company’s share repurchase program does not obligate it to acquire any specific number of shares. Under the program, shares may be repurchased in privately negotiated or open market transactions, including under plans complying with Rule 10b5-1 under the Exchange Act. The increase to the Company’s share repurchase program authorization resulted in a total capital return program of over $130 billion. The Company expects to complete the capital return program by the end of December 2015 by paying dividends and dividend equivalents, repurchasing shares and remitting withheld taxes related to net share settlement of restricted stock units. To assist in funding its capital return program, the Company expects to access the debt markets, both domestically and internationally.
Assignment:
Do you believe Apple’s policy of returning cash to shareholders (see description above and company balance sheet and cash flow statement below) is the right move for shareholders? In answering this question please consider the company’s liquidity (cash and marketable securities), its capital structure, its earnings and cash flow history, and the desirability of paying dividends and repurchasing stock. Calculate Apple’s payout ratio and dividend yield based upon the historical numbers given, and the stock price of $110/share. Calculate any other ratios you believe would be relevant to the question.
