The World Watches Apple's Wallet

03/19/2013 3:00 am EST


Jim Jubak

Founder and Editor,

The company is widely expected to boost its dividend, which has caused some speculators to bid up the price...and could cause a similar drop if the increase falls short of predictions, writes MoneyShow's Jim Jubak, also of Jubak's Picks.

Today, March 19, is the anniversary of Apple’s announcement reinstating a dividend after a 17-year hiatus. The anniversary has set Wall Street analysts into a dividend-predicting frenzy.

Analysts surveyed by Bloomberg project that Apple (AAPL) will raise its quarterly dividend 56% to $4.14 a share. That would give the stock a 3.7% yield. That would be higher than the yield of 86% of the companies in the S&P 500 that pay dividends.

The logic among analysts seems to be no more complicated than that Apple will raise its dividend because it can. The projected annual payout of $15.7 billion could be paid from existing cash flow, the argument goes, and Apple would not have to repatriate cash from overseas and trigger higher tax payments.

Other analysts have pointed out that Apple could easily sell debt to raise extra cash. That would let the company increase the dividend and buy back shares.

Credit Suisse, for example, figures that the company could raise its dividend to 4% in 2013 using its onshore cash and then borrow to buy back shares. For every $10 billion raised at 2.5%, Credit Suisse calculates, Apple could buy back enough shares to increase earnings per share by 2%.

There’s no doubt some of Apple biggest shareholders would like the company to increase dividends. A quarterly $3 a share dividend would mean a total annual payday of $1.6 billion for Apple’s top three institutional investors, BlackRock, Vanguard Group, and Fidelity, Bloomberg calculates.

On this dividend speculation, Apple has climbed to about $455 just before the New York close on Monday, from $420 on March 4. (Apple is a member of my Jubak’s Picks portfolio.)

Full disclosure: I don’t own shares of any of the companies mentioned in this post in my personal portfolio. When in 2010 I started the mutual fund I manage, Jubak Global Equity Fund, I liquidated all my individual stock holdings and put the money into the fund. The fund may or may not now own positions in any stock mentioned in this post. The fund did own shares of Apple as of the end of September. For a full list of the stocks in the fund as of the end of September, see the fund’s portfolio here.

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