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Morgan Stanley: Apple could pay a 1.9% to 3.8% dividend from domestic free cash flow alone

Friday, February 17, 2012 · 2:33 pm · 22 Comments

“Morgan Stanley’s Katy Huberty, who pointed out in a note to clients Wednesday that in addition to the $34 billion in cash and marketable securities Apple has in the U.S. and the $64 billion it holds overseas, it will generate at least $18 billion in free cash flow this year in the U.S. alone,” Philip Elmer-DeWitt reports for Fortune.

“If the company distributes 50% to 100% of that cash to shareholders, that works out (at a $500 share price) to a 1.9% to 3.8% dividend,” P.E.D. reports. “Given the new products (iPad, iPhone, etc.) coming online, Huberty believes the prospect of a dividend could drive Apple’s share price past her current target of $515 to her ‘bull case’ of $600 per share.”

Read more in the full article here.

[Thanks to MacDailyNews Reader "Fred Mertz" for the heads up.]

Categories: News

Tags: aapl, dividend, finance, Katy Huberty, Morgan Stanley

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Comment Feed

22 Comments

peter g

Friday, February 17, 2012 - 2:37 pm · Reply

…because when morgan stanley talk people listen
- correctu
  
  Saturday, February 18, 2012 - 12:22 am · Reply
  
  lol!
  
  Since the stockholders want to talk amongst themselves only and don’t feel a need to hear what others (including the actual dedicated customers that gave Apple that 100 billion in cash) have to say in the next discussion, I decided to post here so as to not annoy them…
  
  That being said… Tim Cook… ignore the greedy pigs below.:
  - correctu
    
    Saturday, February 18, 2012 - 12:43 am · Reply
    
    to extrapolate..
    
    * The pricks below have gotten more than enough money from Apple through the years.
    
    * Morgan Stanley doesn’t deserve it.
    
    * Keep your hard-earned dollars for future purchases, Apple.
    
    * The stockholders below are obviously motivated NOT in Apple’s best interest. They’re talking for their wallets, not for Apple. They’d milk Apple for all that it’s worth if they got the chance and leave the entrails behind without pause.
    
    * Tim Cook, the Zeke dude below is a homophobic asshole. Don’t add any more money to his coffer than you have to. I will post links if needed to prove this. He really hates you, Tim. (lol)
Zmarc

Friday, February 17, 2012 - 2:37 pm · Reply

That’s what I was thinking: Apple doesn’t need to touch their existing reserves to issue a dividend, simply start giving back a little of the new cash coming in.
- Randian
  
  Friday, February 17, 2012 - 2:59 pm · Reply
  
  Sometimes, when the emperor’s new clothes seem disturbingly transparent, no one wants to speak up and point out the obvious (and unpopular) opinion. Well, I will.
  
  As an Apple stockholder since the mid-80′s I have never once seen a dividend from my favorite company. I have seen AAPL rise and fall in evaluation, and I have stuck with them through thick and thin, never selling ONE accrued share in 25+ years (5700 of them) . . . and it’s time for a little payback. Period.
  
  By the end of the current quarter, Apple, inc. will have at least $110 Billion (+) in the bank, here and abroad–and I want a dividend-like share of it. There. Take that. I deserve it, the payout won’t affect the company’s bottom line, purchasing power, or take-over ability one whit. NOT ONE, and we all know it. (Unless, of course, Tim wants to buy Google and put them out of business. In that case, keep the money and PULL THAT TRIGGER.)
  
  That said, let the flaming begin . . . but stockholders only, if you please. Only those with dogs in the hunt may apply.
  - Observer
    
    Friday, February 17, 2012 - 3:33 pm · Reply
    
    While I understand you sentiments somewhat, I don’t agree because if you have 5700 shares as you state, then you have approx. 2.8M in value. Did you actually pay 2.8M for your stock? I suspect not. So, you have gained much in value that you can cash in at anytime and you have then received a very great return on your investment.
    That is the advantage of most non-dividend stock, they move more rapidly. Look at other stocks that pay dividends, they tend not to move in those numbers.
    So which is it? Do you want a stock that pays you or one that grows?
    
    You knew what you were getting into when you bought it. You want your cash but not willing to sale right? Just wondering.
  - m159
    
    Friday, February 17, 2012 - 3:39 pm · Reply
    
    I have not been in quite as long as you, but long enough to have a single digit cost basis. I fired two brokers over disagreements over the prospects for this company and have been rewarded beyond all expectations. Once the company crossed the $200 line I started taking a “dividend” in the form of steady small sales, but still retain the bulk of my position. Up through last year I argued against splitting and dividends, but now favor both. The stock is consistently undervalued and suffers unjustified volatility. Dividends offer rewards for holding now that the prospects of doubling and tripling the SP are fading (trees don’t grow to the sky). A major stock split would qualify AAPL for inclusion in the Dow Index, which cannot handle large dollar stocks. Index fund buying would not only increase but also stabilize the SP. The board should regard the stock as another Apple product and improve it’s design for the benefit of its owners and the company. The time has come for that, and I believe if Steve Jobs were still with us, he would be doing so right now.
    - Observer
      
      Friday, February 17, 2012 - 4:00 pm · Reply
      
      You make good points. I agree that AAPL suffers from being “undervalued” and has minipulated by other factors.
      
      You have made me think differently so I will need to study this a while before commenting more. Thanks
    - Zeke
      
      Friday, February 17, 2012 - 6:19 pm · Reply
      
      I am in exactly the same position you are. Yes, I can sell shares to create my own dividend, but then I’m paying a premium for that dividend of all the future growth those shares would have accumulated, which over the years has proven to be a ridiculous amount. No, let Apple pay a regular dividend out of US profits and it will not hurt valuation at all. It will stimulate investment by institutions and stabilize the share price.
  - dividends
    
    Friday, February 17, 2012 - 6:09 pm · Reply
    
    > As an Apple stockholder since the mid-80′s I have never once seen a dividend from my favorite company.
    
    FALSE.
    
    http://investor.apple.com/dividends.cfm
  - John C. Randolph
    
    Friday, February 17, 2012 - 8:54 pm · Reply
    
    If you’re holding a significant number of AAPL shares (or any other company, for that matter), it’s simple to milk that position just by selling covered calls every month. I’ve been doing that and using the proceeds to buy more shares for years.
    
    -jcr
fandango

Friday, February 17, 2012 - 2:45 pm · Reply

Jeezus…

StFU about Apple ‘dividends’ already.

Apple doesn’t pay dividends on their stock.

If you want a dividend, buy a stock that pays one. End of story.
- macromancer
  
  Friday, February 17, 2012 - 2:55 pm · Reply
  
  Pretty much this. There are stocks like Proctor and Gamble or Johnson & Johnson that pay fine dividends and are about the safest investments you can make. Buy some stock, put the dividends into a DRIP, add more shares as time goes on and watch your money grow.
  - Switcher'05
    
    Friday, February 17, 2012 - 5:34 pm · Reply
    
    What is a DRIP?
    - Mark
      
      Friday, February 17, 2012 - 9:36 pm · Reply
      
      A DRIP is a Dividend Re-Investment Plan. Any proceeds received as dividends are automatically used to purchase more shares of the company’s stock. Some companies allow you to receive fractional shares, so that if a share is $50, and you receive $75 in dividends, you will be granted 1.5 shares of the stock.
- Chris
  
  Friday, February 17, 2012 - 3:35 pm · Reply
  
  Actually there was a period in the 80s where Apple was paying a dividend on their stock.
- Derek Currie
  
  Friday, February 17, 2012 - 8:59 pm · Reply
  
  ‘Yeah but it’s so much fun to be an ANALyst and PESTER PESTER PESTER Apple to see if they’ll give. Gotta test out this new Tim Cook guy. Can we manipulate this him? Can we exploit Apple to the max and corrupt it like we have most other companies in America? It’s a challenge, see? And we at Morgan Stanley just love a challenge.’ <-DANGER! Dickheads At Work.
tbone

Friday, February 17, 2012 - 3:00 pm · Reply

You know, Morgan Stanley- the guys who brought you the crash of 2007-8, took the bailout money (orchestrated by their insider cronies in 2009), ruined many people’s savings and home ownership in 2010 and 11- you know- Morgan Stanley.
DogGonetoo

Friday, February 17, 2012 - 3:14 pm · Reply

If Apple start providing dividends they will tell us. Frankly I don’t care. If Cook thinks its a good ideal then do be it.
shinolashow

Friday, February 17, 2012 - 3:27 pm · Reply

how she can get up in the morning and offer advice to the world on apple defies all personal accountability and shame.
Apple Turnover

Friday, February 17, 2012 - 4:03 pm · Reply

I’m an Apple shareholder since 2004 and I’ve come to the conclusion that they pretty much don’t owe me anything because Apple has given me far more money back than I ever imagined possible. I didn’t think I’d get some multi-bagger stock in Apple. I thought I might get a 50% return my investment in a few years if I got lucky. I figured I’d be able to buy a few more Mac products with whatever those shares returned to me. I have close to 1000 shares and now I can buy any Apple devices I find I want or need.

Sure, in theory, a dividend does sound nice, but I’ll let Apple decide on that. I certainly don’t want them giving a dividend to impair the company’s current growth in any way, and Apple has already given me some quite decent returns without me having any say at all or me having to lift a finger.

As for brokerage houses, I don’t trust them at all since I don’t feel they have Apple’s best interests at heart. They just want to turn a quick buck and then make more demands or to move on and ruin some other company. I’ll admit I’m not all that financially astute, but that’s how it looks to me.
newton*

Saturday, February 18, 2012 - 6:21 am · Reply

Please recall that Katy Huberty was the analyst who in mid-2008, downgraded Apple stock to a Sell with a dramatically reduced price target and the stock promptly dropped from 180′s to 120 or so…this was months before the mortgage meltdown had begun. She caused Apple shareholders huge pain.

Hmmm…how does her 2008 analysis look now? My impression is that she has almost always under-estimated or been wrong about Apple, until she was forced to jump on the bandwagon by Apple’s earnings momentum in the past year or two. I regard every report that she authors with a large block of salt lick.