Will Apple Up Dividends in May?

Bernstein Research’s Toni Sacconaghi has high hopes for Apple (NASDAQ:AAPL) when it comes to moving the nearly $137.1 billion in cash that the company is holding onto, and he thinks that an announcement on what will happen to that stockpile could come in just a couple weeks.

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Driven largely by the iPhone, which has been making up almost half of Apple’s sales in recent years, the company has amassed a large sum of cash. The huge cash stockpile has made investors anxious for Apple to announce a dividend or a share buyback to boost their value, and they managed to get that a little, but it wasn’t quite satisfying enough, considering just how much cash Apple had.

Of the $137.1 billion, $94 billion is held in overseas and can’t be repatriated without incurring a 35 percent tax — which the government would surely love, but shareholders would hate. However, it’s still expected that Apple will give back even more money to its shareholders.

Sacconaghi said the he doesn’t believe that Apple will make an announcement right away, but rather, that the company will wait until a couple weeks after it posts its fiscal second quarter earnings on April 23. That would put the forecast for such an announcement in the second or third week of May…

Apple is already returning a large portion of its U.S.-generated cash to investors, but that amount could go up to about 50 percent, or $22 billion a year. One proposed idea that seems to be gaining more traction is that Apple could take on debt at the current, low interest rates, rather than paying the tax to repatriate its foreign cash stockpile.

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Apple’s share prices could be influenced by whatever decision the company makes on how to change its dividends or share buybacks. Sacconaghi suggested that the company could boost its dividends to a yield of 4.5 percent, which he thinks would put a $470 per-share floor on Apple’s stock. Any higher dividends or complimentary cash management plans could boost the stock even higher. If Sacconaghi’s predictions are right, Apple’s stock could be expected to jump in the middle of May.

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