Sometime in April, analysts believe that Apple will be announcing an increase in stock buybacks. For those that trade Apple, knowing how this will affect the price of its stock over the short term is a must. It’s also important to know at what price levels this will actually have a tangible impact upon the price of stock.
There are a lot of other factors besides buyback amounts that go into this impact. For example, how much of an influence will Apple’s declining iPhone shipments have on this? Also, Apple is expected to raise their dividend amounts at their next earnings release. Analysts think that this could be anywhere from a 5 to 10 percent increase. A dividend increase will hurt stock prices short term, and the higher the percentage, the bigger the impact. That is, unless larger dividends end up bringing more long term value investors to the company. That might be one of the things that management is aiming for, as it would decrease volatility in the stock like what was seen in the last half of 2015.
It’s believed that the buyback amount will be between $30 and $50 billion more than what it has been. Theoretically, this should boost earnings per share by about 5 percent over the course of a year, but that’s just theory. Apple’s authorized buyback amount for 2015 was over $130 billion, and increasing this number drastically would be a big boost for the company’s stock price. It increases scarcity because of a smaller number of existing shares, driving up demand. To put this in perspective, Apple spent less than $100 million in 2014 on buybacks, and less than $70 billion in 2013. However, because Apple didn’t use about $30 billion of what it was authorized for in 2015, it’s likely that we could see more aggressive action in 2016. Fewer shares would also drive up the company’s worth, and give Apple the potential to once again be the most valuable company in the world. This is more of a status symbol than anything, but it’s one that Apple has shown that it cares about in the past.
The buybacks themselves are not as important as when they occur. Timing is far more important than the amount. So it doesn’t matter if it’s $30 billion or $50 billion, or $100 billion over ten years. What matters is when they are announced, and what’s going on with the company when this happens. Apple has mastered the art of releasing information over the years, and it’s likely that this will not be announced until it is completely to their advantage. Therefore, if you are a short term trader, when Apple makes that announcement, you need to be aware of the context in which the announcement is made before you act, specifically if you are a binary options trader and are focusing on a fixed timeframe that cannot be adjusted after the trade has been executed.
Popular sentiment tends to be pointed at Apple’s dividend. They have a decent rate now, but it’s not the kind of rate that long term investors get excited about. If the dividend were to be hiked by more than 10 percent along with a sizeable buyback amount, the impact of the buyback will be much bigger, sending prices up much more dramatically. This is what short term investors should really be focused on. If both of these occur, then binary traders can literally string together dozens of trades one after another with a high degree of success, making this far more profitable for them than if one or the other alone were to occur.