Daniel Epstein on What hyperscalers spend on AI infrastructure, Apple spends on buybacks - 'Hi Rodney, One of the things about Apple’s approach to investor capital return is they are currently very close to returning 100% of profits on an annual basis. And the ratio they are using heavily favors buybacks. The dividend payout this year is close to 15.5 Billion dollars. Buybacks for this year (the 4 quarters ending in Sept) was 89 Billion. A ratio of buybacks 5.74 to 1 Dividend. 104.5 billion for the year. This presumably leaves Apple with ways to adjust what they do for capital return while still retaining enough cash to run the business.. The buyback is easier to adjust without a major announcement compared to a dividend but it also does have unintended consequences. Some people look at the small % of the dividend and think Apple doesn’t return capital to shareholders. The PE ratio of the company is not as comparable over long periods as the decrease in share count changes the numbers over time. Apple earnings per share can grow faster than Apple gross revenue partially due to the share count reduction. Many people don’t understand that. Since the tax implications of the buyback are different than the tax implications of the dividend depending on what kind of account one holds the shares in there are different values to a buyback or dividend for different shareholders. All of which to say is Apple could change this situation if it decided there is an advantage to do so while still returning shareholders a significant amount of money over time whether they recognize it or not. 3% is not easily doable as you said but they could raise the dividend 100% from where it is now and cutback the buyback buy less than a quarter to keep the overall capital return numbers the same. They just favor an increasing stock price that they believe the buyback provides with less of a tax implication for many shareholders.'
on What hyperscalers spend on AI infrastructure, Apple spends on buybacks - 'You raise an interesting point, though, Rodney: If all these borrowed trillions of AI $ don’t create an ROI, who’s on the hook? Well, for one, the middle class taxpayer, since these expenses will presumably be “written off” to some degree as bad investments. But also impacted will be the long term stockholders, who won’t realize the ROIs for which these valuations are being driven up in expectation of. And as those valuations dry up, so will any hikes in dividends. And if the financial hit is serious enough, companies may have no choice but to suspend dividends and suffer the flack that will inevitably result. Apple doesn’t have to concern itself with any of that.'
on What hyperscalers spend on AI infrastructure, Apple spends on buybacks - 'Not based on Meta’s actions! Meta is reprogramming the money from VR/AR/metaverse to AI. Will the Zucker rename the company “AI-something-or-other” as a result of this new focus? (a challenge for the readers here: Suggest the best name for the new AI focused Zuckerberg company…)'
on What hyperscalers spend on AI infrastructure, Apple spends on buybacks - 'Apple has about 14.78B outstanding shares. A yearly dividend rate of 3% would cost Apple $124B (total income is about $112B). To get the share count down to 6.67B where Apple could afford a 3% dividend rate, they will need to buy back about 8.1B shares, which would cost $2.2 trillion dollars (8.1Bx$280). If they spend half their net income on buybacks ($56B/yr), it will take them (at today’s prices) 40 years to get to the place where they can afford a 3% dividend. That is what happens when you pay everyone and their cousin via stock options.'
on What hyperscalers spend on AI infrastructure, Apple spends on buybacks - 'It’s a delightful rumor (glad to see the target is someone other than Apple), but it is at this time a rumor.'
on John Gruber: At Apple, Steven Lemay replacing Alan Dye is cause for rejoicing - 'David, If I had to guess, it would be just profit taking. If I didn’t have my basket full of capital gains this year, I would be selling some here. I will probably sell some Apple around the start of the year.'
on John Gruber: At Apple, Steven Lemay replacing Alan Dye is cause for rejoicing - 'The full article is an interesting read, and I come away even more glad at the change. Though there was a whole lot more of more substance than this, I loved this quote at the end: “My favorite reaction to today’s news is this one-liner from a guy on Twitter/X: ‘The average IQ of both companies has increased.'”'
on Premarket: Apple is red - 'Index futures are mixed at close to 9am in the east. In pre-market activity Apple is off $0.48 at $283.67. Amazon is up $0.07 at $232.46 ahead of the bell after dropping $2.04 in Wednesday trading. Oppenheimer just raised its price target on the shares to $305.'
on What hyperscalers spend on AI infrastructure, Apple spends on buybacks - 'Every pundit, academic, and analyst wants to spend Apple’s money in their own way, having little knowledge of what it actually buys, creates, or eventually receives for that expenditure. And like a lot of acquisitions, personnel and new businesses, does it actually mesh with what your core business is, what you do best, and how well you run your company? When you try to reinvent yourself, does it always work, or does it cause a lot of disruption?'
on What hyperscalers spend on AI infrastructure, Apple spends on buybacks - 'Took a look at Laskin’s CV, he’s a spinmeister with no real experience actually doing anything. Why should his comments on the optics of Apples business mean anything?'
on Premarket: Apple is red - '“Challenger, Gray & Christmas”??? Thats a bit ominous for a jobs related company Especially EOY 🙁'
on Apple resists, India caves - 'If only the EU could understand the foolishness of their ways…. smh'
