How Does Apple Invest its Massive Cash Hoard?

After heavy criticism in regards to its massive cash hoard, Apple (NASDAQ:AAPL) recently announced it will more than double its capital return program. The tech giant is able to return value to shareholders through its impressive balance sheet, but most of the cash will remain overseas and invested in various securities.

Apple is a money-making machine. The company posted a net profit of $9.5 billion for its fiscal 2013 second quarter. Revenue increased 11 percent to $43.6 billion, compared to $39.2 billion a year earlier. This kind of success has allowed Apple to grow its cash pile to historic levels.

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Taking the total of Apple’s cash and cash equivalents, short-term marketable securities, and long-term marketable securities, the company’s cash position grew to a record $144.7 billion at the end of March. In comparison, Apple held a total cash position of $110.2 billion a year earlier. As the chart above from Zero Hedge shows, a growing cash pile is business as usual for Apple. The company’s total cash position is bigger than the entire market capitalization of Facebook (NASDAQ:FB), Hewlett-Packard (NYSE:HPQ), Dell (NASDAQ:DELL), Pandora (NYSE:P), and Netflix (NASDAQ:NFLX) combined.

In order to return more of this cash to investors, Apple’s Board of Directors approved a plan to return $100 billion by the end of 2015, representing a $55 billion increase from the original plan announced last year. It raised its buyback program from $10 billion to $60 billion, and hiked its quarterly dividend from $2.65 to $3.05 per share. Investors will receive an average of $30 billion per year from the time of the first dividend payment in August 2012 through December 2015. Apple is now the largest dividend payer in the market, and holds the title of launching the biggest single share buyback program in history. The previous record-holders were Microsoft (NASDAQ:MSFT) and Procter & Gamble (NYSE:PG).

“We are very fortunate to be in a position to more than double the size of the capital return program we announced last year,” said Tim Cook, Apple’s CEO. “We believe so strongly that repurchasing our shares represents an attractive use of our capital that we have dedicated the vast majority of the increase in our capital return program to share repurchases.”

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Due to Apple keeping more than $102 billion of its $145 billion cash pile offshore to minimize taxes, the company will issue debt to help fund the capital return program. Meanwhile, Apple has its cash allocated across several categories. According to Apple’s latest 10-Q (which excludes the prior quarter), the company has just over $7 billion in pure cash, with another $7.3 billion in money market funds and mutual funds. A whopping $50 billion is invested in corporate securities, representing the biggest capital allocation category. U.S. Treasury and agency securities account for $43.6 billion.

Mortgage and asset-backed securities represent $13.7 billion of Apple’s portfolio. Other smaller categories such as non-U.S. government securities, certificates of deposit and time deposits, commercial paper, and municipal securities account for $4.9 billion, $2.4 billion, $2.1 billion and $6.1 billion, respectively.

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