2 Possibly Good Things About Apple's Brutal Sell-Off Today

Even as Apple (NASDAQ: AAPL  ) continues to get relentlessly crushed today following Cirrus Logic's (NASDAQ: CRUS  ) preliminary release last night, there may still be two silver linings for Apple investors. The data can't all be bad (it's mostly bad).

An earlier iPhone just got more likely
There was part of exactly one sentence within Cirrus Logic's release that's driving Apple down today: "... due to a decreased forecast for a high volume product as the customer migrates to one of Cirrus Logic's newer components."

Apple shareholders are getting rattled today by the notion of a "decreased forecast" for iPhones, at a time when investor sentiment and expectations are already remarkably low for the Mac maker's prospects. There's been plenty of concern that the company may miss its revenue guidance due to weak iPhone sales, as numerous rivals have launched high-end flagships and new iPhone models are months away.

However, within the latter half of that snippet lies a positive hint. Migrating to newer components could mean that Apple is approaching its production ramp of its next-generation iPhone models. Investors have been expecting the company to launch new iPhones as early as June or July, but there has also been speculation that Apple is running into production challenges and may be forced to push back toward September or October.

If Apple's migration has already begun, then that means investors might be able to expect new iPhones sooner rather than later. It's still a speed bump for Cirrus Logic, since it's preparing for an inventory writedown, but in this case what's bad for Cirrus Logic may not necessarily be all bad for Apple.

A killer dividend yield just got more likely
At Apple's low today, its annual dividend yield has been pushed up to an impressive 2.6%. That's the type of payout that could satisfy most income investors looking for a steady stream of cash.

Furthermore, that's before even factoring in Apple's inevitable dividend boost. There's little doubt that Apple will increase its payout; investors just don't know how or when the Mac maker will decide to return more cash to shareholders.

The company could easily double its dividend payout from $10 billion annually to $20 billion annually, which would likewise double its dividend yield to 5.2%. That's nearly irresistible to income-oriented folks, and Apple wouldn't even necessarily need to put up any growth or capital appreciation to keep those types of investors happy (though it wouldn't hurt). At a 5.2% yield, Apple would easily be the best-paying tech titan, well ahead of rivals Microsoft and Intel, both of whom are renowned for their dividend generosity. That level of payout would also top both AT&T and Verizon, which are defensive utility stocks.

Company

Dividend Yield

Microsoft

3.2%

Intel

4.1%

AT&T

4.7%

Verizon

4.1%

Source: Reuters.

If one bought in today and Apple subsequently doubles its dividend within the next couple months, the yield alone would make it a worthy income investment.

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  • Report this Comment On April 17, 2013, at 8:59 PM, toadog wrote:

    Sometimes its stunning to me how two different people can see the same situation so differently.

    They are Forecasting a write down!? no one in their right mind comes to an earnings call and predicts a write down because the "FORECAST" said so? You understand its a suicide mission...

    But if you are more certain you will be down, and are confident of that, you bring that to earnings...

    point is, no one makes this call without being certain...and the only way to be certain....is to know damned well that they WILL be going down, not Forecast to be down. How does one get this certainty? THEY ARE TOLD...we are ending this one, going to another one. Has nothing to do with phone sales or those sales slipping. It just means the phone is being built with something new....

    how can this have gotten so twisted...this fear about such is obscenely overblown...

    See ya'll on Tuesday!

  • Report this Comment On April 17, 2013, at 9:14 PM, AceInMySleeve wrote:

    Bragging about the dividend increase is like being happy when a bond loses value.

  • Report this Comment On April 17, 2013, at 10:30 PM, Jjkiam wrote:

    The latest collapse of Apple whether due to Cirrus or not is more confirmation of a CEO and a Board that have completely disowned themselves from any responsibility to their shareholders. They have watched for over 7 months the dismantling of shareholder value in the company they are supposed to be managing on behalf of the people( shareholders) they are supposed to be working for!

    Tim Cook has only had one thing to say while sitting back and letting this happen " I don't like it" ! Wow What a leader! Has he or the board taken any action to stop the decent and destruction of a huge part of their bosses(shareholders) equity! The answer is clearly NO! I honestly can't recall any company which has watched it's stock collapse and done absolutely NOTHING to stop it. This is probably one of the most egregious examples of mismanagement ever seen ESP since the company still makes money and is positioned in the fastest growing areas of mobile. If the major remaining shareholders don't demand TC's resignation and a complete reshuffling of the board, I will be shocked. Forget the hundreds of thousands retail investors like myself who have lost huge amounts of their money. The major shareholders are now on the hook to all their clients who will demand that they either exit this dog or do something to correct this disaster. And all this while Apple still makes huge amounts of FCF. This could easily have been prevented if REAL leadership had asserted itself on behalf of the company and a different narrative been offered to the rumors that apple had lost it's innovation edge. Every public appearance by TC has resulted in more stock declines. His trip to China lead to the Chinese Govt conducting a major smear campaign! His remarks about Apple's pipeline being full have been followed by no new product launches or even major refreshes for months now. Please I appeal to the major shareholders GET THIS GUy OUT OF CUPERTINO! And dismiss the whole board

  • Report this Comment On April 17, 2013, at 11:57 PM, tkell31 wrote:

    Or it could simply be supply has built up so much they dont need the older product, and will eventually be switching to the newer product anyway. I hate to point out the obvious, but if the newer product demand was there now, why would Cirrus miss their revenue targets so badly?

    My take is they are switching, have plenty of iPhone5s on hand because sales have slowed, and look to report a bad quarter next week.

    The great news is a dividend increase of any decent amount (25% or more) should stabilize the price at 420 or so (roughly a 3% dividend) so not only shouldnt there be any long term downside from here, but there should be a small gain coming.

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