Over the last decade, Apple (NASDAQ: AAPL) has returned a staggering $847 billion in cold, hard cash to shareholders via dividends and share buybacks. That’s almost enough cash to buy out Berkshire Hathaway or even scoop up four AMDs (NASDAQ:AMD). Apple has quietly returned the market caps of whole Fortune 500 companies, just to its investors.
Close-up of blue logo on sign with facade of headquarters buildings in background near the headquarters of Apple Computers in the Silicon Valley, Cupertino, California, August 26, 2018. (Photo by Smith Collection/Gado/Getty Images)
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Let’s look at some numbers and compare how this payout power stacks up against the market’s biggest capital-return machines.
Returns
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Why is this significant? Because dividends and share buybacks provide direct, tangible returns of capital to shareholders. They also indicate management’s confidence in the company’s financial well-being and capacity to generate sustainable cash flows. There are other firms that exhibit similar attributes. Below is a list of the top 10 companies, ranked by the total capital returned to shareholders through dividends and stock repurchases.
Top 10
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For the complete ranking, visit Buybacks & Dividends Ranking
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What do you observe in this data? The total capital returned to shareholders as a percentage of the current market capitalization seems to be inversely related to growth potential for reinvestment opportunities. Companies such as META and MSFT are growing significantly faster, in a more predictable manner, than others, yet they have returned a smaller percentage of their market capitalization to shareholders.
That’s the downside of high capital returns. While they are appealing, one must consider: Am I compromising growth and solid fundamentals? With this thought, let’s review some statistics for AAPL. (See Buy or Sell AAPL Stock for additional insights.)
AAPL Fundamentals
- Revenue Growth: 6.0% LTM and 1.8% average over the past 3 years.
- Cash Generation: Approximately 23.5% free cash flow margin and 31.9% operating margin LTM.
- Recent Revenue Shocks: AAPL’s lowest annual revenue growth in the last three years was -0.9%.
- Valuation: AAPL is currently trading at a P/E ratio of 38.3.
- Opportunity vs S&P: Compared to the S&P, it offers higher valuation, superior LTM revenue growth, and better margins.
Fundamentals
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This overview is valuable, but assessing a stock from an investment viewpoint requires a more comprehensive approach. That’s exactly what Trefis High Quality Portfolio provides. It is engineered to mitigate stock-specific risk while allowing for upside potential.
AAPL Historical Risk
With that being said, Apple is not immune to significant declines. It fell roughly 81% during the Dot-Com bubble and experienced a 61% drop in the Global Financial Crisis. The 2018 correction and Covid sell-off also registered declines in the range of 31-39%. Even the recent inflation shock corresponded to a drop of around 31%. Strong companies can withstand challenges better, but sudden market declines can still be impactful.
However, the risk isn’t confined to major market downturns. Stock prices can decline even amidst favorable market conditions – consider events like earnings releases, business updates, and changes in outlook. Review AAPL Dip Buy Analysis to understand how the stock has bounced back from significant drops in the past.
The Trefis High Quality (HQ) Portfolio, featuring a selection of 30 stocks, boasts a history of consistently outperforming its benchmark, which includes the S&P 500, S&P mid-cap, and Russell 2000 indices — and has achieved returns exceeding 91% since its inception. Why does this happen? In aggregate, HQ Portfolio stocks deliver superior returns with reduced risk compared to the benchmark index; they provide a smoother ride, as illustrated in HQ Portfolio performance metrics.