Analyst: Apple Dividend Makes Good Sense

| Apple Stock Watch

Apple announced it a shareholder dividend and stock buyback program on Monday, and Sterne Agee analyst Shaw Wu thinks the plan is a good idea. Company CEO Tim Cook and CFO Peter Oppenheimer discussed the program during a special conference call with analysts early Monday morning.

Apple dividend time is coming soon“We believe paying a dividend makes a lot of sense for both shareholders and employees given the company’s high profitability and strong ability to generate free cash flow,” Mr. Wu said.

The company will launch its US$2.65 per share dividend before the end of its fiscal year this fall, and will start a three-year program to buy back some $10 billion in shares before the end of the calendar year.

Currently, Apple has over $97 billion in cash to work with.

“We estimate that AAPL will likely generate $75-80 billion in free cash in the next four quarters versus the $45.3 billion we estimate the company generated in the previous four quarters,” Mr. Wu said. “And that’s why we estimate and believe paying a dividend yield in the 2-2.5 percent range makes sense.”

He added, “The other reason to pay a dividend is that a growing number of funds are focused on delivering yields and stocks that pay dividends. We believe this would expand and stabilize Apple’s shareholder base.”

Mr. Wu is maintaining his “Buy” rating and $620 target price for Apple’s stock. Apple is currently trading at $592.54, up 6.97 (1.19%).

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Comments

aryugaetu

That’s total BS. He never explained what Apple gets out of it - just a bunch of happier investors. That’s hard to believe. Apple’s stock is still skyrocketing, a very attractive investment that produces its own rewards, so there is no reason to give away the cash on hand. Dividends are merely bribes to investors to buy their company’s stagnant stock. It is much more typical of slow-growth companies.

Steve Jobs was a very savvy businessman, breaking many firmly held business myths. Now, this new move is based on a bunch of old-school directors playing it safe, unwilling to “Think Different”. Without recent innovative ideas and products, this move brings a huge shift in Apple’s business focus; not too different when Balmer started to run Microsoft.

Investors that love leading-edge companies will be selling their shares based on the fear of Apple’s own people believing there is nothing more.

Putting business and finance leads at the top of a company, with the innovativeness of lobotomized lemmings, is the surest way to induce an company’s agonizing death.

ibuck

Shawn Wu:

“We estimate that AAPL will likely generate $75-80 billion in free cash in the next four quarters versus the $45.3 billion we estimate the company generated in the previous four quarters?

As a long-time shareholder, I hope Mr Wu is correct?or even anywhere in the vicinity of correct?in his earnings/profits and share-price estimates. But I wonder if it might serve Apple and their shareholders to slightly lower prices, thereby possibly increasing volume and market-share, and profits as well.

BurmaYank

“That?s total BS. He never explained what Apple gets out of it - just a bunch of happier investors….
Putting business and finance leads at the top of a company, with the innovativeness of lobotomized lemmings, is the surest way to induce an company?s agonizing death.”

Well said. I couldn’t agree more..

Apple should have kept Apple stock prices as low as possible, by not issuing dividends, and invested its excess cash in:

- developing new manufacturing processes
a) which utilize interchangeable manufacturing modules which can be quickly inserted or replaced into totally automated assembly lines, to maximize flexibility, speed, precision, reliability, etc., in greatly accelerated, enormously customizable ?just-in-time? production,
b) which can be designed to rapidly create other bespoke/one-of-a-kind interchangeable manufacturing modules as needed, designed by intelligent software,
c) which might require only human employees in the hundreds (if even that) for operations as big as Foxconn?s,
d) which are therefore in totally automated megaplants, all only within US shores, and
e) which utilize only free energy sources (geothermal, wave/tidal power, sun, wind, etc.) and fuel-cell, battery or flywheel energy storage forms.
f) which could be patented and licensed to all kinds of other technology manufacturers, such as Apple’s competitors, or to underdeveloped countries with large free energy resources, for creating all sorts of astonishingly-easy-to-build manufacturing processes all over the world.

- and any left-over excess money after that could be used to buy back Apple stock at the reduced rates of a company which refuses to issue dividends can enjoy.

Tiger

I guess it need not be said who’s rolling over…...

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