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Apple had first quarter results out last week. The numbers were fine, and the stock price is above $300 again. The all-time high is $327.85. Not far to go!
There was obviously some sales impact of Covid-related Apple store shutdowns around the world, but they were not as severe as expected. Lots of iPhones, iPads, AirPods and Macs were sold online and delivered by courier. The services business did well, and April was the strongest month on Apple's App Store in the last two and a half years.
At the results presentation, CEO Tim Cook rejected the idea that they should retool their supply chain as a result of Covid. When the virus shut down China in February, Apple was criticised for being too reliant on that country for the final assembly of its key products. He pointed out that the production system is back up and running now, demonstrating its resilience.
The new flagship 5G iPhone models expected later this year have had their release dates pushed out by about a month, but should still be available to sell in the critical year-end holiday season. Working from home has resulted in a surge in demand for the new Apple MacBooks.
The company declared a dividend of $0.82 per share for the quarter, an increase of 6 per cent. The annual dividend yield is about 1.1%. Significantly, the board authorised an additional $50 billion for share buybacks. Although this is less than the $75 billion and $100 billion authorised in the two previous years, the CFO Luca Maestri pointed out the company still has $40 billion left over from last year. So in reality they have $90 billion of buyback "firepower" on hand.
I know that some people are critical of companies that use their cash reserves to buy back shares. When companies do this, and then fall on hard times (and the share price goes much lower) it looks ridiculous. That has not happened to Apple. They have historically bought back shares at much lower prices. I really like the idea of weak shareholders being flushed out, leaving those of us with a long-term view to enjoy a higher portion of annual profits.
Apple is the most valuable aggregate holding in our client portfolios, and looks set to stay in that prime position. It really is a stock that every investor should buy and hold. The more, the merrier!.