For most companies, share buybacks sound attractive. They can offset shares issued to executives. And as long as the market is rising, things look good. Most companies aren’t Apple (AAPL). The consumer tech giant just beat earnings and raised its share buyback program to a staggering $90 billion.
That’s on top of a dividend payout as well, increasing the amount of cash the company returns to shareholders every year.
The $90 bullion share buyback is pretty close to the $89.6 billion the company earned in its most recent quarter, a 54 percent rise from a year earlier. And iPhone sales came in higher than expected, an area that had been a concern over the past year.
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Shares rallied off the earnings numbers, and are up about 85 percent in the past year. Shares are still a bit below their all-time highs hit a few weeks ago. Given the strong growth numbers, it’s likely shares will continue to trend higher.
Action to take: The company pays a dividend, but has been a slow grower in the past year, and the current yield is just 0.6 percent. A better way to play the current trend in shares is with a call option.
The August $140 calls, going for about $6.15, offer high double-digit growth in the coming months, and stand a great chance of moving in-the-money. As with any call option trade, look for a chance to take profits well before expiration to avoid time premium decay.
Disclosure: The author of this article owns shares in the stock mentioned here, and may make an additional trade on this company after the next 72 hours. The author receives no compensation from any of the companies mentioned in this article.