The multi billionaire technology giant Apple has decided to invest heavily in its shareholders as it faced its first profit decline in nearly a decade in March 2012. The company included this strategy in its course of action in 2014 as well and plans to keep on working on it in 2015 too.
Apple Inc. (NASDAQ:AAPL) is one of the most successful technological giants, which always sells state of the art technological devices and software. However the company faced a decline in its profit as its net income fell 18% in its fiscal second quarter in 2013 as well. The investors were taken aback by the company’s stock, which led to the decline in its share value from their peak last year.
Apple will remain strong even though the decline in the stock price has been very frustrating to those who follow the stock, according to the Company’s Chief Executive Tim Cook. He vowed to keep on introducing new innovative products throughout 2014 fall, also giving a hint about exciting new product categories.
In order to get re-organized Apple Inc. Inc is already working on making deals with the Deutsche Bank and Goldman Sachs this year. An unknown source indicated that Apple Inc might also consider selling its Bonds in Euros. Apple has also borrowed $35 billion in the past year and a half and has given $135 billion to its shareholders in the past two and half years. The question arises why a multi billionaire rich company as Apple Inc is giving loads of money to its shareholders when it is already facing decline in its annual profit?
According to Apple’s CEO its capital return program is prodigious. According to some people it simply wants to keep its shareholders contented to maintain their goodwill. The company has earned a Net income of $9 billion this year out of which it had less than $4 billion for capital expenditures and generated a fraction of $13 billion from operations. Apple arranges its accounts in a way to keep only 12% of its cash in the US and keeps the remaining overseas. One reason for which is to avoid high US corporate income tax rate.
Apple is not the only one practicing this; many US based corporations have adopted the same method of not bringing money back to the US. This could be one reason for Apple Inc.’s (NASDAQ:AAPL) borrowing of money, which Apple considers extremely cheap, as the interest rate ranges from 0.45% to 4.45% in a period of 30 years. The money that its shareholders are getting back in majority of cases is more than the original invested amount because of its shareholder program, in which it borrows huge amount of money and then also adds dividend to it before distributing it among the shareholders, thus doubling the original amount.
The shareholders return program announced in 2012 was launched at $45 billion, which rose to $100 billion in 2013 and then to over $140 billion in 2014. Hence the company borrows more and more money just to give dividend to its share holders and to avoid bringing huge piles of money back to the US.
