Analyst: AAPL to Raise Shareholder Dividend

| Apple Stock Watch

Apple bought back another US$14 billion of its own stock when prices dropped after its first quarter earnings report in a move CEO Tim Cook called "opportunistic." Wells Fargo analyst Maynard Um sees that as a move to help increase value for long-term investors, and he thinks Apple will announce a dividend increase for shareholders in April, raising the amount from $3.05 to $3.45.

Wells Fargo sees an Apple stock dividend increase comingWells Fargo sees an Apple stock dividend increase coming

Mr. Um told investors,

Given Apple's propensity to be more long-term shareholder friendly, we believe Apple is more likely to surprise on a dividend increase though expect a similar share repurchase authorization to support similar opportunistic opportunities. However, with $34.4 billion of cash onshore at the end of fiscal Q1, we believe Apple will have to raise debt in order to fund the dividend increase and another share repurchase program.

He sees the potential announcement as a positive for the company that could drive the stock value higher.

Apple is part way through a $60 billion stock buyback plan that investors like Carl Icahn think should be far more agressive. Mr. Um estimates that Apple's most recent buyback brought 27.5 million more shares back into the company's hands.

Mr. Icahn would like to see Apple speed up its buyback time table and increase the program by another $50 billion. Whether or not Apple should bump up its buyback plan will be a topic at the company's annual shareholder meeting at the end of February.

Based on Apple's share buybacks over the past two weeks, Mr. Um is raising his second fiscal quarter earnings per share from $10.51 to $10.74, and he's raising his fiscal 2014 and 2015 EPS estimates by $0.63 and $1.02, respectively.

Mr. Um is maintaining his "Market Perform" rating and $385-$576 target range for Apple's stock. Apple is currently trading at $521.36, up 8.85 (1.73%).

Comments

aardman

This is the kind of buyback that makes sense, when the market is going through it’s periodic bouts of panic and irrationality.  Two things good about this:  The buyback is not designed to prop up the stock price.  The buyback punishes the stockholders who sell on the swoon, i.e. stockholders who are easily swayed by rumor, innuendo, and click-whoring analysts.

Constable Odo

Please, Apple.  No more buybacks after this initial one.  Either do more acquisitions or increase my dividends.  I honestly don’t see any improvement in Apple’s stock from these buybacks.  If it’s the buybacks that are propping Apple’s current share price up then I’m even more scared.  It’ll only prove that Apple is really worth nothing while Google is just leaving Apple in the dust without anything supporting Google’s stock (no buybacks, no dividend, a high PE).  Google is simply putting Apple to shame as a growth and value stock.  Google seems to have thoroughly convinced investors that driverless cars and and army of autonomous robots give Google an unlimited path of growth.

vpndev

Buybacks do make sense because Apple does provide stock awards to employees (not just Tim Cook).

However I wonder if Apple’s cash pile is now so large that it will increase dividend, and maybe buy back some stock, to keep it more-or-less constant. It’s now about $160 B and it probably doesn’t need to be any bigger.

That would be an interesting scenario.

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