Apple Investors: Still Waiting For the Golden Egg
“Cash is clearly on investors’ minds,” said Topeka Capital analyst Brian White about Apple (NASDAQ:AAPL) shareholders, clearly stating the obvious.
He even listed it as one of three steps the company needed to make a recovery, alongside its stock price hitting a trough and the company finding a means to open up new, large market opportunities. “We believe creating a safety net around Apple’s stock with a larger cash distribution is the first phase necessary to stabilize Apple’s stock price,” he wrote earlier this week.
Many speculated that Apple would increase its dividend in celebration of the one-year anniversary of its reinstatement on Tuesday, but that day passed in silence, and the stock dipped down $1.23, or 0.27 percent, to $454.49 after climbing as much as 2.7 percent the previous day.
With the $137 billion that Apple has in its stockpile still gathering dust, analysts continue to outline ways it could be used or redistributed, and investors want to know if the company will use that money to buy back shares, increase a dividend payment, or pay a special dividend…
Silence has not prevented expectations from snowballing ever larger, especially as the stock has lost more than 35 percent of its value since hitting a high of $705 on September 21, 2012.
In order to rationalize why Apple’s dividend payment is the size that it is currently, analysts have taken to comparing it to the dividends paid by other technology companies.
When looking at sheer size, WisdomTree Asset Management’s Jeremy Schwartz noted that Apple’s dividend payment — standing at nearly $10 billion — is largest of any technology company. Microsoft’s (NASDAQ:MSFT) comes in $2 billion lower. But in terms of its payout ratio, Apple falls at the low end of the scale when compared to its big cap technology rivals. As CNBC reported, the analyst said that Apple’s estimated dividend payout ratio, based on projected earnings, is just 23 percent. For perspective, the average estimated payout of Microsoft, Intel (NASDAQ:INT), IBM (NYSE:IBM), and Cisco (NASDAQ:CSCO) — four of the largest technology companies — is 30.3 percent.
If Apple increased its dividend payout ratio to 30 percent, “Apple’s dividend would grow to approximately $13.71, or $12.9 billion a year,” Schwartz told the publication that at its current stock price, this would result in an approximately 3 percent dividend yield.