Apple's Cash Balance Should Continue To Grow Rapidly--Even With The Dividend And Buyback

Hydrant sprayApple’s cash flow — AFTER the dividend.

One important point about Apple’s announcement that it will begin to pay a 2% dividend and spend $10 billion on a share buyback…The company’s cash balance should continue to grow rapidly even while it is using this cash.


Because Apple is generating a lot more cash each year than it plans to pay out.

Apple generated about $33 billion of cash last year.

Assuming Apple continues to grow rapidly and maintain high profit margins, the way most analysts expect it will, this annual cash flow should increase. A back-of-the-envelope assumption would be cash flow of $40 billion this year, $50 billion next year, and $60 billion the following year, for a total of about $150 billion over three years.

Meanwhile, Apple says its dividend and buyback program will use up to $45 billion of cash over the next three years. This is composed of about $10+ billion a year in dividends and $10 billion in the buyback.

If Apple generates $150 billion of cash and pays out ~$45 billion in dividends and a buyback, its net cash should increase by ~$100 billion over the next three years.

So in three years Apple’s cash balance could approach $200 billion, even with the dividend and buyback.

Now, Apple could obviously use some of its cash to make acquisitions or investments. And it could increase its dividend and buyback program. And its margins or growth could stumble.

But the important point is… assuming ongoing growth and no huge acquisitions, Apple’s cash balance should continue to grow rapidly, even with the dividends and buyback.

SEE ALSO: Apple Announces $11 Dividend And $10 Billion Stock Buyback

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