Apple (AAPL) this evening announced it will host a conference call at 9 am, Eastern time, tomorrow morning to “announce the outcome of the Company�s discussions concerning its cash balance.”
Could this be the long-anticipated announcement of a dividend?
ISI Group’s Brian Marshall, who maintains a Buy rating on Apple shares and a $650 price target, this evening reiterates an expectation that Apple will declare a dividend of 2.5% yield. That would be $14.65 per share annually, based on the recent closing price, or one third of his current EPS projection for this calendar year.
Such a dividend would place Apple at the top of the pack of companies he covers in hardware, he writes, ahead of Hewlett-Packard’s (HPQ) 2% yield and Cisco Systems‘s (CSCO) 1.6%.
“We believe a dividend will drive an incremental ~$4.5bil in stock purchases (i.e., similar to adding a new top 10 holder),” writes Marshall, “from top 20 dividend mutual funds and ETFs assuming AAPL is a new 2.5% position.”
Kenneth Hackel, the president of CT Capital, this evening sent out a missive in which he opines that Apple should not dip into its nearly $100 billion in cash, equivalents and investments, and instead should resolve to pay out 75% of its free cash flow per quarter.
Spending the balance doesn’t help the stock, he writes, but promising future cash flow payouts does:
A distribution of the current balance would not be expected to aid the share price any more than it helped Microsoft-for good reason-a stock is worth the present value of prospective free cash flows. Giving shareholders 75% of future free cash flows equates to a dividend of about 5%, given estimated growth, and almost certainly propel the stock.
CT does not own Apple shares.
You can catch the webcast of the co! nference call here.
Apple Leads Tech�s Consolidation of Cash, Says Moody�s, March 14th, 2012; Apple: $50B of Debt Might Be �Attractive Option,� Says Bernstein, March 13th, 2012.