Apple (NasdaqGS: AAPL), the world’s largest company by market value, reported fiscal second-quarter earnings after the close of U.S. markets Monday, thrilling investors by upping its capital return program to $200 billion.
That includes expanding its share buyback program. Already one of the largest repurchasers of its own shares after spending $56 billion on buybacks last year, reducing its shares outstanding count by about 7%, Apple’s board “has increased its share repurchase authorization to $140 billion from the $90 billion level announced last year,” according to a statement issued by the California-based company.
Apple also said it is boosting its quarterly dividend to 52 cents a share from 47 cents. That is good for a $1.16 billion increase, one of the largest dividend increases ever by a member of the S&P 500, according to S&P Dow Jones Indices.
Apple now has $194 billion in cash. To put that into context, only 24 U.S.-listed companies, including Apple, have market values north of $200 billion. That is all great news for Apple investors, particularly those planning on holding the stock for the long-term, but on Tuesday, buyback exchange traded funds are not responding to news of Apple’s expanded buyback effort. [Apple Advances Toward Buyback ETF]
For example, the PowerShares Buyback Achievers Portfolio (NYSEArca: PKW) is trading only modestly higher. The $3 billion PKW is the largest buyback ETF and allocates 20.6% of its weight to the technology sector. More than half of PKW’s tech weight goes to Apple and International Business Machines (NYSE: IBM), which combine for 10.8% of the ETF’s weight.
After flirting with entry into PKW last year, Apple finally gained admission this year. The ETF rebalances in January and requires a company’s shares outstanding count be reduced by 5% in the previous year, a requirement Apple easily met in 2014. Apple and IBM combine for more of PKW’s tech weight than the ETF’s 40 other tech holdings combined. [Apple Finally Enters Buyback ETF]
The SPDR S&P 500 Buyback ETF (NYSEArca: SPYB), which debuted in February, is trading slightly lower today. SPYBtracks the S&P 500 Buyback Index, which “provides exposure to the 100 constituent companies in the S&P 500 with the highest buyback ratio in the last 12 months. The buyback ratio is defined as the ratio of the total cash put towards buybacks in the trailing year and the market capitalization of the company as of a reference date,” according to a statement issued by SSgA.
Apple is SPYB’s eighth-largest holding, but the fund is an equal weight ETF and none of its holdings command a weight north of 1.14%. [New Buyback ETF Debuts]
From August 2012 through March 2015, Apple repurchased $80 billion of its own stock, according to the company’s statement.
PowerShares Buyback Achievers Portfolio
Tom Lydon’s clients own shares of Apple.