With its capital allocation practices under discussion, Apple (NASDAQ:AAPL) must use the opportunity to give its sagging stock a boost, Topeka Capital’s Brian White said. According to the analyst, while David Einhorn’s suggestion of issuing perpetual preferred stock was a good one, Apple could also increase its dividend payout and boost its stock repurchase program.
“With the 36 percent decline in Apple’s stock since late September, Apple is clearly undergoing a shift in its shareholder base,” White wrote in a note to clients on Thursday. “However, we believe a much more significant return of cash is necessary to attract more value-oriented investors and David Einhorn recognizes this dynamic.”
According to White, Apple’s current system of $2.65 in quarterly dividend and the $10 billion, three-year stock repurchase program could do with some increases.
“Apple should increase its cash dividend payout to $3.75 to $5 per share on a quarterly basis at an annual yield of 3.3 percent to 4.5 percent,” he wrote. “At the same time, it has plenty of room to ramp up the stock repurchase program to as high as $100 billion as part of a five-year initiative.”
Einhorn’s proposal of Apple issuing $50 billion in perpetual preferred stock at a 4 percent annual cash dividend yield was “innovative,” White said…