Most investors focus on a company’s growth prospects when considering a purchase of its stock. And understandably so. Revenue and earnings growth isn’t the only way to add to a stock’s value, however.
Reducing the number of outstanding shares of a company is another, often-overlooked means of making existing shareholders’ stakes worth more. The company in question simply needs to repurchase shares of itself in the open market and then take them out of circulation.
Apple’s stock repurchases, by the numbers
Apple (NASDAQ: AAPL) has been one of the more prominent names embracing this idea. Although it pays a dividend, it’s opting to reward investors by buying shares of itself rather than raising its dividend payouts. Over the course of the past four reported quarters, Apple has shelled out $78.1 billion to repurchase 456 million shares of its own stock. For perspective, Apple’s current market capitalization stands at $2.6 trillion, and it’s got nearly 15.58 billion outstanding shares.
OK, the stock repurchase program isn’t exactly making a huge dent in shareholders’ favor. Keep things in perspective, though. This is an enormous company. It’s going to take a lot to make a beneficial difference in its float. Given what’s feasible, Apple’s buyback program is actually quite impressive.
It’s also worth pointing out that the company continues to make overall net progress in terms of reducing the supply of shares in its effort to make its remaining ones more valuable. Unlike too many other corporations, this one isn’t issuing new stock just as quickly as it’s repurchasing and retiring existing shares. As of the end of last year, there were about 2% fewer outstanding Apple shares than there were a year earlier.
Another bullish argument
Is the company’s stock buyback program a reason in and of itself to purchase Apple stock? No. The consistent net repurchases of its own shares, however, certainly bolsters the bullish argument for owning Apple stock. The thing is, even if Apple were a net issuer of new shares of itself, it would still be a great investment.
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James Brumley has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Apple. The Motley Fool has a disclosure policy.
Here’s How Much Stock Apple Repurchased in the Past Year was originally published by The Motley Fool
