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

By Evan Niu, CFA - Apr 17, 2013 at 8:10PM

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Cirrus Logic brings down Apple with it, but maybe the data points aren't all bad for Apple (it's mostly bad). What does today's news say about the possibility of earlier iPhones and a killer dividend yield?

Even as Apple (AAPL 4.08%) continues to get relentlessly crushed today following Cirrus Logic's (CRUS 2.35%) 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.


Dividend Yield









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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Stocks Mentioned

Apple Inc. Stock Quote
Apple Inc.
$149.64 (4.08%) $5.86
Cirrus Logic, Inc. Stock Quote
Cirrus Logic, Inc.
$81.38 (2.35%) $1.87
Microsoft Corporation Stock Quote
Microsoft Corporation
$273.24 (2.76%) $7.34
Verizon Communications Inc. Stock Quote
Verizon Communications Inc.
$51.40 (0.80%) $0.41
AT&T Inc. Stock Quote
AT&T Inc.
$21.29 (-0.14%) $0.03
Intel Corporation Stock Quote
Intel Corporation
$44.55 (2.46%) $1.07

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

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