Cash flow from operations was 636 billion in fiscal

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Cash flow from operations was $63.6 billion in fiscal 2017, $65.8 billion in fiscal 2016, and $81.3 billion in fiscal 2015. Management believes the Tax and Jobs Act will promote a more optimal capital structure. In April 2018, Apple announced a new $100 billion share repurchase authorization. It also boosted its capital return program by $50 billion in both April 2017 and April 2016. Within the new capital allocation program, in April 2018 Apple hiked its quarterly dividend by 16%, to $0.73 per share. In April 2017, Apple hiked its quarterly dividend by 10.5%, to $0.63 per share. Prior hikes include 10% in April 2016, 11% in April 2015, 8% in April 2014, and 15% in April 2013. Apple declared its first quarterly dividend in April 2012. Based on the higher-than-expected dividend hike in April 2018, our dividend forecasts are $2.72 for FY18 and $3.06 for FY19. MANAGEMENT & RISKS Timothy Cook has served as CEO since industry legend Steve Jobs passed away in 2011. Former Apple controller and former Xerox CFO Luca Maestri became CFO in September 2013, succeeding Peter Oppenheimer. Phil Schiller is the head of worldwide marketing, and Jon Ivey is the chief of design. Apple has a deep bench of executive, engineering and marketing talent. We think that it will continue to attract high-quality talent, both from an engineering perspective as well as in the corporate leadership ranks. While investors have criticized Apple for its closed ecosystem, that system does have the effect of prompting consumers to buy iPads and Macs for system compatibility. Even more compelling to brand loyalty are Apple’s services, including iTunes, App Store, and iCloud, as consumers do not want the cost and complexity of pulling their media libraries out of the comfortable arms of Mother Apple. Despite its enormous revenue base, Apple continues to grow phone units and revenue at a double-digit pace. The shares are always at risk from the perception that growth could slow as the law of large numbers catches up with Apple. The company has mitigated that risk, in our view, with very aggressive shareholder return policies, which will likely remain paramount. Despite the company’s growing largesse, we expect institutional investors to continue to demand more aggressive dividend growth and a larger share repurchase plan. COMPANY DESCRIPTION Apple manufactures PCs, MP3 players, smartphones, tablet computers, software and peripherals for a worldwide customer base. Its products include the Macintosh line of desktop and mobile PCs, the iPod MP3 line, the iPhone, the iPad, and various consumer products, including Apple TV. Apple also owns and operates iTunes, the world’s largest vendor of recorded music. Apple derives 40%-45% of its revenue from the Americas, 20%-25% from Europe/MEA, 12%-16% from Asia-Pacific, and 15%-18% from its own retail stores.
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M ARKET D IGEST - 7 - VALUATION AAPL trades at 16.9-times our FY18 EPS forecast and at 15.2-times our FY19 forecast; the two-year average P/E of 16.0 is now above the five-year (FY13-FY17) trailing multiple of 13.6. In a market that has reached record highs, Apple is trading at a slight premium to historical relative multiples. Over the past five years, AAPL has traded at an average 16% discount to the
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