Analysts who were polled by Bloomberg seem to be in consensus that Apple (NASDAQ:AAPL) may raise its dividend yield by at least 50 percent, to help break its stock from the downward spiral it has been experiencing, Bloomberg reported.
This would provide investors with the largest dividend yield in the history of the technology industry in the U.S., and in total, is estimated to be worth $15.7 billion, or about $4.14 per share. This is a 56 percent hike over last quarter’s dividend, and represent the average figure of the analysts polled.
CEO Tim Cook, who at this time one year ago reinstated the dividend and announced a $10 billion buyback, has been facing increasing pressure from investors over what the company should do with its $137.1 billion in cash reserves. Investors — including David Einhorn of Greenlight Capital, who led a high profile lawsuit against the company to promote larger dividends — are asking for higher per share yields while Apple’s growth has been slowing and competition becomes increasingly fierce, Bloomberg said.
“The accumulation of cash has become excessive,” said Brian White, an analyst at New York-based Topeka Capital Markets. “It doesn’t matter which bearish scenario you forecast, they’re never going to need this much cash.” White ranks Apple’s stock as a buy, with an $888 price target, one of the highest estimates.
At 10:20 AM EST, Apple’s stock was up 1.28 percent, to $449.36.
Last year’s announcement of dividends broke a 17 year streak fostered under Steve Jobs, who held preserving capital as a high priority. Analysts Laurence Balterm with Oracle Investment Research, says Apple could add as much as $42 billion to its cash balance this year, and since $15 billion of that amount would be generated in the U.S., the company could pay out its dividends without incurring taxes associated with moving money back into the country.
If a payout of $3.00 was issued this year, Apple’s top three institutional investors – BlackRock, Vanguard Group and FMR — would net about $1.6 billion in annual gains. Together, the three hold about 133.4 million shares of the company.
Apple’s stock has taken a battering recently, and its shares are selling at a discount, after commanding a premium for the past ten years. The price-to-earnings ratio has also slid below Microsoft’s (NASDAQ:MSFT) this year, for the first time since January 2002, according to data compiled by Bloomberg.
Copyright Wall St. Cheat Street. All rights reserved.