Apple's Cash Pile to Cross $100B in Q2, May Declare Dividend Next Quarter

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Apple CEO Tim Cook
Apple CEO Tim Cook spoke briefly about Apple TV--the set-top box Apple product--at the Goldman Sachs Technology Conference on Tuesday. Cook alluded to the fact that Apple may be exploring other ways to market a TV product.

iPhone maker Apple Inc. (NASDAQ:AAPL) posted a record quarterly results on strong demand for iPhone, iPad, and Macs. The company's cash pile reached near $100 billion and is expected to surpass the coveted $100 billion mark next quarter.

However, it has been investors million-dollar question that when Apple will return its war-chest of cash to shareholders in the form of dividends or share buybacks.

It could be high time for Apple to declare a dividend or repurchase its common shares as the company's cash position is swelling by each quarter. Apple's operating cash flow was $17.5 billion for the first quarter, with cash rising to about $98 billion or $104 a share. In the fourth quarter, Apple reported cash and cash equivalents of $82 billion.

Apple does not buyback stock or have a dividend, and former chief executive Steve Jobs was hesitant to return cash to shareholders. Instead, he favored reinvesting cash in business.

Historically, Apple uses its cash to fund strategic acquisitions of components/capacity, small acquisitions, and funding R&D and other investments.

However, with a new CEO Tim Cook at the helm, investors are optimistic that Apple may soon declare a dividend. During the conference call, Apple CFO Peter Oppenheimer said that the company was holding $64 billion outside the United States.

Analysts have been pointing out for long that given Apple's rapid growth, it should consider a meaningful dividend policy. But shareholders who were happy with the rising prices of Apple shares may now become impatient with the company, which has $98 billions of cash but not returning the same to shareholders.

While Apple indicated it is actively discussing uses of its cash, it was reticent to affirm specifics regarding returning cash to shareholders (e.g., dividend, buyback), RBC Capital Markets analyst Mike Abramsky wrote in a note to clients.

However, Canaccord Genuity analyst Michael Walkley is more optimistic and feels that the investors wait for dividend from Apple is nearing an end as he expects the technology giant may declare a dividend during 2012, potentially next quarter when crossing $100 billion in cash and cash equivalents.

We anticipate another year of record cash generation. With Apple expected to cross $100B in cash during the March quarter, we believe this milestone might push Apple to announce a dividend, Walkley wrote in a note to clients.

Apple, whose $98 billion cash balance is more than sufficient to plug December's U.S. budget deficit and roughly equals California's state budget for 2012-13, needs to increase its potential investor base in order to achieve $500 billion plus market cap and having a dividend could increase Apple's available capital pool by 3 to 4 times. As of Jan 25, Apple's market capitalization stood at $415.13 billion

Walkley noted that Apple dividend as very bullish for investors, as he believes a new group of investors seeking dividends would invest in Apple and drive shares higher.

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