The Time Is Right for an Apple Dividend Boost

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In just over one week, it will have been exactly one year since Apple (NASDAQ: AAPL  ) announced its plans to reinitiate its dividend while instituting a share repurchase program. A day before the announcement, Apple said it would conduct a conference call specifically to discuss its swelling cash balance, making it clear that cash would be the only topic of discussion.

The vast majority of public companies tend to stick with dividend payouts on an annual basis before making changes, unless circumstances dictate otherwise. With that one-year mark quickly approaching amid rising investor discontent, is the timing right for another cash announcement?

Topeka Capital Markets analyst Brian White sure thinks so. The analyst believes that since David Einhorn's high-profile spat and Apple's annual shareholder meeting are now both in the rearview mirror, the "timing could be right for a bigger deployment of cash." At current trajectories, White is modeling for Apple's cash balance to grow to $241 billion by the end of fiscal 2015 -- over $100 billion more than it current has.

Since Apple clearly has well more than it realistically needs, White estimates that Apple could afford to boost its quarterly dividend payout from current levels of $2.65 per share up to a range of $3.75 to $5 per share. Those payouts would represent dividend yields of approximately 3.5% to 4.6%.

Apple's repurchase program is intended to offset equity dilution from share-based compensation, but White thinks the Mac maker could increase this authorization to as high as $100 billion over five years. Compare that to the current program that started with an authorization of $10 billion over three years ($2 billion and one year completed so far).

Finance guru Aswath Damodaran once suggested that Apple implement a "shockingly large" buyback program. I think $100 billion would qualify. The timing is absolutely right for a dividend boost. What are Cook & Co. waiting for?

There is a debate raging as to whether Apple remains a buy. The Motley Fool's senior technology analyst and managing bureau chief, Eric Bleeker, is prepared to fill you in on both reasons to buy and reasons to sell Apple, and what opportunities are left for the company (and your portfolio) going forward. To get instant access to his latest thinking on Apple, simply click here now.

Read/Post Comments (4) | Recommend This Article (11)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On March 11, 2013, at 8:45 PM, alboy5 wrote:

    i-yi-i-yi. Ole man aapl has seen its best days.

  • Report this Comment On March 11, 2013, at 9:36 PM, TMFGemHunter wrote:

    While I think Apple "should" boost its dividend, I don't think that will happen right away. It seems more likely that they will boost the dividend after four quarters of the current payout, i.e. for the August dividend. But I do hope that they go for more than just a 10%-15% hike. Apple really needs to return more of its cash to shareholders in order to undo some of this multiple compression.

  • Report this Comment On March 11, 2013, at 10:04 PM, SyDVooh wrote:

    This is the wrong time for AAPL to increase its dividend. They should wait for the price of the stock to rise above $600 per share. Increasing the dividend now will only lead to further attacks from Wall Street, as has been happening these past few months. If you reward Wall Street for attacking AAPL, to loot its treasury, by increasing the dividend now, then the WS attacks will continue. Likewise with a larger buy back program. AAPL management needs to heed Warren Buffet's advice, "ignore Wall Street, and just run the business well." If anyone owns AAPL shares, and doesn't like the way the company is run, then sell your shares, and find a stock that better serves your investment needs and goals. The long term investors in AAPL will be richly rewarded. Ives and Cook have said that there are great things in the pipeline. Some of which we shall see in a few short months. I'd prefer that AAPL buy shares in other companies and become a conglomerate/fund, such as Berkshire Hathaway, with a tech company as its core business, as insurance is for Berkshire Hathaway. Buying large blocks of other companies stock would diversify AAPL shares and stabilize them against tech market swings and product cycle release times.

  • Report this Comment On March 12, 2013, at 1:06 AM, SimchaStein wrote:

    buyback and divi increase make sense - regardless of bloggers, David "Tinhorn", etc.

    1) Buying stock has an IRR of 10% or much more when the stock goes up.

    2) Apple will needs Millions of shares for employee incentives over the next decade. And if the stock goes lower, fine, they can buy back more a lot more.

    3) A stable stock price is good for employee morale. You don't want employees second guessing about owning stock.

    4) Their pay-out is below 20%. Easy to increase divi about 20%.

    5) A divi increase of $2 annually is the same cost per share as Einhorn's nutty idea, but has long term value - and less long term exposure.

    Prediction: Increase buyback and divi - Analyst tout - "Total Return" as if they discovered Newtonian physics.

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