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Apple predicted to announce 'modest' increases to share buyback & dividend in next earnings call

post #1 of 16
Thread Starter 
The highlight of Apple's next quarterly earnings call later this month could be moderate increases to the company's share buyback program and dividend payouts to shareholders, many investors reportedly expect.

Apple


Gene Munster of Piper Jaffray said in a note to investors on Wednesday that he expects Apple to announce an increase for its share repurchase program, as well as its quarterly dividend, in its next earnings report on April 23. Munster said most buy-side investors agree with this line of thinking, representing Wall Street's expectations going into the announcement of March quarter results.

According to Munster, this belief is likely already priced into shares of AAPL, so any announcements come April 23 may not have a significant effect on the company's stock price.

Apple has been under investor scrutiny for sitting on a pile of cash that was at one point near $160 billion. Facing pressure from Wall Street, the company responded by buying back billions of dollars worth of its own shares, and also paying out a quarterly dividend that is currently at $3.05 per common share.




Regarding Apple's actual performance in the March quarter, Munster believes the results will come in on the high side of the company's guidance, which called for revenue to between $42 billion and $44 billion. He noted that in the four quarters since Apple began giving its more "realistic" guidance ranges, it has tended to report toward the high end.

Wall Street generally expects Apple to report revenue of $43.5 billion in the March quarter.

Looking ahead to the June quarter, Munster said current expectations are for 10 percent year over year growth. His own estimates call for Apple to grow 5 percent in the June quarter, though he believes that those results "will be largely ignored" as investors look toward product updates in the second half of the year.

Munster believes investors should buy in to AAPL stock, as he has high hopes for the company's product refresh cycle in the second half of 2014. He said most meetings with investors over the last month have shown that many on Wall Street are skeptical that this year's new products will have a meaningful effect on shares of AAPL, but Munster disagrees.

"We think that buy side expectations for the impact of iPhone 6 and new product categories are relatively low, suggesting upside to shares if the products ultimately are more meaningful," he wrote. "Worst case it seems that an in-line product cycle would mean that shares do nothing."
post #2 of 16
Well, that is what I would expect if Apple were to post weak numbers. So… uh.. mmm
post #3 of 16
expected 10% revenue growth YOY, doom!
post #4 of 16
Hey does anyone want to bet that Apple does another 15% raise in dividends exactly as they did last year? That would be $3.51 per quarter if anyone is keeping count. If they keep this up over the next 4 years by 2018 the dividend will go to 21.33 per year or $5.33 per quarter. Do you know any other investment which can bring you a 15% compounding return on your money over the next 4 years?

The share buy back with more aggressive targets makes even more sense when you see this is the basic plan. 120,000,000 shares could be bought with $90 Billion if share prices stay low. This would only require Apple growing income at 10% per year and still we would see the outstanding share count drop to just under 800 million with employee compensation plans adding 30,000,000 shares. Apple would be saving $2.56 billion per year in dividend payouts if they made that purchase. The income Apple earned over the 4 years would be just shy of $200 Billion. The icing on the cake would be Apple's dividend payout would still be under 38% of earnings. So cash on hand would go up by about $40 Billion after paying out the dividend and the cash on hand would be $200 Billion. A PE of 13 would bring the share price to 926.25 per share. Assuming Mr Market gets a clue and figures out how stable Apples income and profits are we could easily see the PE stretching its legs up to 21. That would bring 1496 per share. Each share would have $250 in cash on hand and debt might be $50.

Pure speculation, but not unreasonable. 280 % return on equity and a 175% increase in dividend payout over 4 to 5 years.
post #5 of 16

They are setting Apple up to be shorted again, they setting goals which they have not clue about, so they can short the stock when it does not meet their made up expectations.

post #6 of 16
Quote:
Originally Posted by Macnewsjunkie View Post

A PE of 13 would bring the share price to 926.25 per share. Assuming Mr Market gets a clue and figures out how stable Apples income and profits are we could easily see the PE stretching its legs up to 21. That would bring 1496 per share. Each share would have $250 in cash on hand and debt might be $50.
 

The days of  21 PE are long gone.  But I see what you're doing and many of us have run these numbers over and over back in the TheMacObserver forum awhile ago...it's not that we disagree, it's that Apple is too easy to play (see below).

 

But yes, I would agree with you that with share buybacks, increased cash position and a 13+ PE...there is NO BETTER STOCK TO OWN LONG. 

 

Quote:

Originally Posted by Maestro64 View Post
 

They are setting Apple up to be shorted again, they setting goals which they have not clue about, so they can short the stock when it does not meet their made up expectations.

Only thing you left out was, "rinse and repeat". :-)

But it's not just the shorts, it's also those that move in and out of Apple (and Company X, whose prices move inversely to Apple).  This game will continue to be played as long as there's money to be had.

 

But above, you'll see Macnewsjunkie's rational analysis as to why AAPL will continue to move up in the long term, to which I agree.

post #7 of 16
The problem is that most of Apple's money is not in the USA and therefore share buybacks and dividends all have to come from US holdings which are far less robust or Apple has to borrow against their overseas cash. Apple are reluctant to repatriate overseas cash and pay a large tax burden thus giving it to the government rather than shareholders. The US is one very few countries which tax world wide corporate profits of domestic firms. Most countries only tax companies on their earnings within the country, even when the companies are based in that country. In other news some republicans are open to a tax holiday for repatriating corporate cash so Apple may be stalling some to see what the midterm elections bring. And of course Apple just beefed up their lobbying strength by hiring a former senate finance aid.
post #8 of 16
What, no wacky TV prediction from Munster? He's slipping.

Proud AAPL stock owner.

 

GOA

Reply

Proud AAPL stock owner.

 

GOA

Reply
post #9 of 16
Quote:
Originally Posted by SpamSandwich View Post

What, no wacky TV prediction from Munster? He's slipping.

He's hoping everyone will forget.
post #10 of 16
Quote:
Originally Posted by Macnewsjunkie View Post

Hey does anyone want to bet that Apple does another 15% raise in dividends exactly as they did last year? That would be $3.51 per quarter if anyone is keeping count. If they keep this up over the next 4 years by 2018 the dividend will go to 21.33 per year or $5.33 per quarter. Do you know any other investment which can bring you a 15% compounding return on your money over the next 4 years?

The share buy back with more aggressive targets makes even more sense when you see this is the basic plan. 120,000,000 shares could be bought with $90 Billion if share prices stay low. This would only require Apple growing income at 10% per year and still we would see the outstanding share count drop to just under 800 million with employee compensation plans adding 30,000,000 shares. Apple would be saving $2.56 billion per year in dividend payouts if they made that purchase. The income Apple earned over the 4 years would be just shy of $200 Billion. The icing on the cake would be Apple's dividend payout would still be under 38% of earnings. So cash on hand would go up by about $40 Billion after paying out the dividend and the cash on hand would be $200 Billion. A PE of 13 would bring the share price to 926.25 per share. Assuming Mr Market gets a clue and figures out how stable Apples income and profits are we could easily see the PE stretching its legs up to 21. That would bring 1496 per share. Each share would have $250 in cash on hand and debt might be $50.

Pure speculation, but not unreasonable. 280 % return on equity and a 175% increase in dividend payout over 4 to 5 years.

Lol, thanks for the laugh.  PE of 21 for a company with no net revenue growth and a dividend under 2.5%?  Keep dreaming.

post #11 of 16
Quote:
Originally Posted by SpamSandwich View Post

What, no wacky TV prediction from Munster? He's slipping.

Munster is the biggest analytical bone-head of them all…..even Wells Fargo's Maynard Um. Munster hasn't gotten anything right about Apple or AAPL in many, many years. If we went by what he has predicted, we'd have a 96" flatscreen AppleTV by now. I wonder why AI keeps quoting him.

Why does Apple bashing and trolling make people feel so good?

Reply

Why does Apple bashing and trolling make people feel so good?

Reply
post #12 of 16
Why would an expectation of increased dividend and share buyback be "already priced into shares of AAPL"? And if it is, why would Munster make a point of mentioning it in his note to investors? Either it's new information or it isn't. You can't say, "Oh, this is new" and also "everyone has already acted on the information."
post #13 of 16

Wish Apple would stop with this nonsense. Steve Jobs would never have capitulated to this level with wall street no matter how hard. The moment Tim Cook went to dinner with Carl Ichan it was a done deal. 

post #14 of 16
Quote:
Originally Posted by Apple/// View Post
 

Wish Apple would stop with this nonsense. Steve Jobs would never have capitulated to this level with wall street no matter how hard. The moment Tim Cook went to dinner with Carl Ichan it was a done deal. 

What nonsense specifically are referring to?...increased dividends?  Share buybacks?  Or just the fact that Tim went to dinner with Carl?  I think all of you that spout these things off are over reacting.  From a pure financial perspective, Apple is doing the prudent thing with dividends and buybacks...it's arguable if you have information that we don't have such as future investment/M&A, but other than that, it makes zero sense to sit on that much cash.  Tim has dinner with a lot of people and I'm sure he talks with many influential and wise people.  The market and the company doesn't change course because he had a dinner and a chat with (IMO) another financial powerhouse figure.

post #15 of 16
Quote:
Originally Posted by drewys808 View Post
 

What nonsense specifically are referring to?...increased dividends?  Share buybacks?  Or just the fact that Tim went to dinner with Carl?  I think all of you that spout these things off are over reacting.  From a pure financial perspective, Apple is doing the prudent thing with dividends and buybacks...it's arguable if you have information that we don't have such as future investment/M&A, but other than that, it makes zero sense to sit on that much cash.  Tim has dinner with a lot of people and I'm sure he talks with many influential and wise people.  The market and the company doesn't change course because he had a dinner and a chat with (IMO) another financial powerhouse figure.

 

To be clear, I am not a financial expert or plan to be. I am just a fellow who has followed Apple and the tech industry for some time. My post was more of an emotional reaction to the news of more buybacks or increased dividends. I don't believe Apple is doing the right thing with their money. I think investing in the company towards more growth is the way to go. I look at Google and in many ways they are a model in how to think outside the box in terms of investing in its future. Apple does not do this. Google lays down a foundation for the company so that they have their hands many different cookie jars. This insures success in the future. For Google and its shareholders. Apple does not do this. Since Mr. Jobs passed, Apple has become an extremely rich company. Yet they are only willing to play within their own sandbox. The investments they make while important are small and limited to improving the existing product line. That is fine. But not when sitting on a 140 billion dollars. It is my opinion that Apple should be thinking outside the box and investing in its self. 

 

Apple is a company that sells consumer products. They rely on how great that product can be. If it isn't great then profits drop. I feel they need to build as a tech company more then just a product company. The way Apple is today, they are as good as their next product cycle is. I don't think Apple should rely on each product cycle as its only measure of success.

post #16 of 16
Quote:
Originally Posted by Apple/// View Post
To be clear, I am not a financial expert or plan to be. I am just a fellow who has followed Apple and the tech industry for some time. 

Good of you to admit, but you know and I know, that non-experts often have the most common sense/valuable approaches. :-)

 

Quote:
Originally Posted by Apple/// View Post
 I think investing in the company towards more growth is the way to go. I look at Google and in many ways they are a model in how to think outside the box in terms of investing in its future. Apple does not do this. Google lays down a foundation for the company so that they have their hands many different cookie jars.

Yes, I feel that growth and investing in the future should be an absolute priority for Apple. Just know that Google and Apple are so different...one being that it is in Google's DNA to throw stuff at the wall to see what sticks and that works for goog. However, that philosophy would probably end up hurting Apple more than help. I think it's safe to assume that Apple DOES HAVE ITS HAND IN MANY different cookie jars, they're just more secretive about it?

 

Quote:

Originally Posted by Apple/// View Post
Apple is a company that sells consumer products. They rely on how great that product can be. If it isn't great then profits drop. I feel they need to build as a tech company more then just a product company. 

Absolutely.  And this an important year for Apple.  If Tim/Apple don't deliver in 2014, Tim's head will be fair game. Personally, I'm not desiring this, but that's how the corporate game is typically played.

 

I'm still under the impression that sitting on a ridiculously large pile of cash was probably not the right thing to do either, so increased dividends and share buy backs was almost a no-brainer.  Hopefully Apple can do what you have suggested while still prudently managing their cash. 

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