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 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%).