FREE Breaking News Alerts from StreetInsider.com!
E-mail Address
Top NewsMost Read Highlighted
Get AlertsAAPL Hot Sheet
Rating Summary:
48 Buy, 11 Hold, 1 Sell
Rating Trend: Down
Today’s Overall Ratings:
Will Apple (Nasdaq: AAPL) trading to annual lows be a boon for dividend investors?
The latest data out of Cupertino, CA-based Apple had the company adding about $16 billion in cash through the quarter, bringing its war chest up to $137 billion, or $145 per share. When cash is taken into consideration, shares trade for seven times FY13 earnings expectations, or 10 times ex-cash.
Apple initiated a dividend program last year, paying out $2.65 per share every quarter. The good news is that the yield on that payout has improved to 2.4 percent; the better news is that that yield might move even higher.
One analyst from Bernstein thinks that apple should “significantly” increase its dividend to three percent or more, though the best number might be a four percent yield, or annual dividend of $18 per share. The increase would put Apple with a payout ratio of 40 percent projected FY13 EPS, from about 25 percent now. Other biggies like Pfizer (NYSE: PFE) and General Electric (NYSE: GE).
Apple gets about 30 percent of profits from U.S. sales, notes Barron’s this morning. That means Apple might need to repatriate foreign earnings and pay taxes, and/or tap its $43 billion of domestic cash reserves. The Bernstein analyst thinks Apple should mull selling about $50 billion in debt, enough to take its outstanding share count down by 10 percent or increase its dividend for the next five years. He thinks Apple could garner a rate under 2 percent for 5- and 10-year bonds.
Given the trouble Apple had through the 1990s, the company has become and remained cash-conservative. Plans to payout about $45 billion the next three-years isn’t a lot for a company netting $40 billion annually. Some speculation still surrounds Apple losing market share in key areas like the U.S. and China, while international growth opportunities are becoming scarce without a lower-cost device. There are positives for Apple too, including the possibility of a new TV set sometime in 2013.
With shares dropping 38 percent over the last few months, investors might be looking for more than just promises when it comes to getting back behind Apple. The company could induce more confidence with a larger payout, something its share prices is desperately longing for.
The stock is down about 0.5 percent early.
Join StreetInsider.com FREE and get immediately alerted when news breaks on your stocks and other market items – JOIN NOW