Apple Inc. announced that it has authorized another $90 billion for share buybacks and dividends, matching last year’s figure and signaling confidence in its ability to generate cash despite a revenue decline.Embed from Getty Images
The iPhone maker reported quarterly earnings on Thursday that beat analysts’ estimates, but also revealed a 5% drop in sales to $94 billion, mainly due to lower demand for Macs and iPads. The company blamed supply constraints and the impact of the Covid-19 pandemic on its business.
However, Apple also highlighted its profitability and cash flow, which enable it to return capital to shareholders through buybacks and dividends. The company has been the biggest spender on share repurchases in the past decade, reducing its cash pile and moving toward net cash neutrality, a goal that finance chief Luca Maestri has mentioned in previous earnings calls.
Net cash neutrality refers to a point at which a company’s cash balance is about equal to its debt. At that time, the board could decide to slow the pace of its capital return. Apple is currently working off a pile of cash that ballooned to $269 billion, its high point over the past decade. The company says it now has $165 billion in cash and $111 billion in debt for $54 billion in net cash, its lowest position in years.Embed from Getty Images
Apple also raised its dividend by 5%, following a 10% increase last year. The company said it plans to pay a quarterly dividend of 22 cents per share on May 13.
Analysts welcomed Apple’s capital return program, saying it reflects the company’s strong fundamentals and growth prospects. Citigroup Inc’s Jim Suva said in a note earlier this month that Apple could announce more buybacks and even an increase in its dividend. Barclays Plc’s Tim Long said in a report that “we expect AAPL to continue to work toward being net cash neutral sometime in the future.”
Apple’s shares rose 1.2% in after-hours trading on Thursday, after closing at $136.37 in New York.