Apple’s exceptionally large cash reserve led it to recently announce that it would expand the amount of funds to be returned to its shareholders through dividends and stock repurchases. But during the period Apple’s “capital return” program spans, Apple’s forecasted earnings exceed the amount to be returned from its cash reserve, suggesting that, on balance, Apple’s cash reserve may still increase over the next few years.
Here’s the math. Under the program a total of $100 billion of Apple’s cash reserve is to be returned to shareholders through increased dividends and its share repurchase program by the end of 2015. Apple’s financial statements indicate that $9 billion has already been distributed to shareholders, which leaves another $91 billion to be returned. Based on the consensus earnings forecast for Apple, the company will earn about $125 per share between now and the end of calendar 2015, which translates to about $110 billion in net income.1 Thus, a rough forecast of Apple’s net income between now and the end of 2015 is nearly $20 billion higher than the amount remaining to be distributed under the capital return program. This differential suggests that Apple’s cash position may continue to grow over the next few years.
The continued exceptional health of Apple’s cash reserve suggests that a significant share of it could be used to advance other priorities without harming the company’s financial security. As discussed here, with Apple shareholders taken care of by the capital reserve program, Apple should now turn its attention to using its cash reserve to address the labor rights violations suffered by the workers making the company’s products.
1. This rough calculation assumes the company’s share repurchase program occurs at a steady pace, at a price of $435 per share, its market price as of this writing. Also, the consensus forecast, of course, is just that; actual net income could be lower or higher.