Good Case Study About Payout Strategy

Apple Incorporated announced the last quarter of their financial information on October 2015. Apple’s revenue has increased this 2015; they accumulated revenue worth $51.5 billion quarterly, and the net profit that was accumulated quarterly was worth of 11.1 billion USD. Last year, the corporation has accumulated their quarterly revenue of 42.1 billion USD, and the net profits that were accumulated quarterly were worth 8.5 billion. The Apple’s overall gross margin is 38 percent in 2014, which has increased by 1.9 percent in 2015. The quarterly revenue of Apple Incorporated came from the international sales (62 percent of revenue).
The financial performance of the company is impressive. It is currently experiencing financial growth, thanks to the sale of iPhone and the introduction of the Apple Watch, including the availability of Mac. The company’s record shows that they have accumulated 13.5 billion USD in their operating cash flow and that their earning per share has increased by 38 percent. The CFO of the Apple claimed that they have returned $17 billion to the investors of the company through the payout strategy – dividends and repurchases. In the first quarter of 2016, the company is expecting the tax rate to be 26.2 percent; the gross margin to be between 40% and 39%; the quarterly revenue to be between 77.5 billion USD and 75.5 billion USD; and the other expenses or income to be0 worth 400 million USD. The uncertainties and risks include, without restriction, the result of economic factors and competition, which include the response of Apple towards those factors and on decision of business buying and consumers in regards to the products of Apple. The capacity of the corporation to provide products to the market encourages the demand of buyers for innovations in technology and the introduction of new programs and products in a timely manner. The market competitiveness also improves the company’s financial performance (Apple 2016).

The link for the Apple Incorporated Financial Summary in the Fourth Quarter of 2015 (Yahoo Finance)

<http://finance.yahoo.com/q/ks?s=aapl+Key+Statistics>
The payout strategy of Apple Incorporated involves repurchases and dividends. This is because if the company maintains the aggressive repurchase shares at the same time as the low stock price rates, then it would be beneficial for them. The buyback has less talked about advantages of the shares for retiring where the company will have to pay the dividends in the future. This approach pumps up the earnings per share of the company as a result of the corporation’s overall earnings being stretched into smaller numbers of shares (Sullivan).
Apple Incorporated announces that they will be using dividends and repurchase as their payout strategy. As a shareholder of Apple Incorporated, I will be pleased with the company’s announcement on the strategy for payout. The advantage with dividends is that it pays the investors the share of the profit that was accumulated by the company since the shareholders are to some extent are partly owners of the corporation. In addition, the dividends are beneficial to shareholders because it provides them profit from the stock ownership of a particular corporation without removing their stake. I do agree with the repurchase announcement of Apple Inc. because the lesser the company stocks are on sale in the markets, the more profit each share will have.

Works Cited

Apple. Apple Reports Record Fourth Quarter Results. Apple, 2016. Accessed 12 Jan 2016
<http://www.easybib.com/reference/guide/mla/website>
Sullivan, J. Dividends and Buybacks: Why Apple Inc.’s Strategy Works for Investors. Fool, n.d.
Accessed 12 Jan 2016
<http://www.fool.com/investing/general/2015/07/20/dividends-and-buybacks-why-apple-incs-strategy-wor.aspx>